BILL ANALYSIS �
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: April 10, 2013 2013-2014 Regular
Session
Consultant: Alma Perez Fiscal:Yes
Urgency: No
Bill No: SB 435
Author: Padilla
As Introduced/Amended: February 21, 2013
SUBJECT
Compensation: piece-rate workers: rest and recovery periods
KEY ISSUES
Should employees paid on a "piece-rate" basis be encouraged to
take their 10 minute rest period by ensuring that they will be
paid for that time?
Should an employee taking a five minute cool-down rest period to
recover from overheating as encouraged under California's Heat
Illness Prevention regulations be paid for that recovery time?
ANALYSIS
Existing law establishes, within the Department of Industrial
Relations, the following entities:
Industrial Welfare Commission (IWC): to regulate
employee wages, hours and working
conditions. (Labor Code �70-74)
Division of Occupational Safety and Health (Cal/OSHA):
tasked with the responsibility
of protecting workers and the public from safety hazards
through its various programs.
Occupational Safety and Health Standards Board (OSHSB):
to adopt reasonable and enforceable standards at least as
effective as federal standards.
Division of Labor Standards Enforcement: to adjudicate
wage claims, investigate discrimination and public works
complaints, and enforce Labor Code and IWC orders.
Existing law, with certain exceptions, defines a day's work as
eight hours of labor. Any additional hours worked in excess of
eight hours in one day, or a 40-hour workweek, must be
compensated with the payment of overtime.
Regarding meal and rest periods, existing law requires the
following:
Meal Periods: An employer may not employ a worker for a
period of more than five hours per day without providing
the employee with a meal period of not less than 30
minutes, except that if the total work period per day is no
more than six hours, the meal period may be waived by
mutual consent of both parties. A second 30 minute meal
period is required if an employee works more than ten hours
per day, except if total hours worked is no more than 12,
the second meal period may be waived by mutual consent only
if the first meal period was not waived. (Labor Code �512)
Rest Periods:Industrial Welfare Commission Wage Orders
require that employers authorize and permit nonexempt
employees to take a rest period that must, insofar as
practicable, be taken in the middle of each work period.
The rest period is based on the total hours worked and must
be at the minimum rate of a net 10 consecutive minutes for
each 4 hour work period, or major fraction thereof. A rest
period is not required for employees whose total daily work
time is less than 3.5 hours. According to the IWC wage
orders, authorized rest periods are counted as time worked
and therefore, must be paid by the employer.
Under existing law , no employer shall require any employee to
work during any meal or rest period mandated by an applicable
order of the Industrial Welfare Commission. If an employer fails
to provide an employee a meal period or rest period in
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accordance with an applicable order of the IWC, the employer
shall pay the employee one additional hour of pay at the
employee's regular rate of compensation for each work day that
the meal or rest period is not provided. (Labor Code �226.7)
This Bill would extend existing rest period protections
available within the Industrial Welfare Commission orders to
workers paid on a "piece-rate basis" as well as make them
applicable during an employee's recovery period, as specified.
Specifically, this bill would:
Define "piece-rate basis" as a method of payment based
on units of production earned by an employee during a work
day or pay period, or any fraction thereof.
Add to the existing IWC wage order requirements
regarding meal and rest periods, the following:
o Prohibit an employer from requiring an
employee to work during any meal, rest or recovery
period mandated pursuant to any applicable statute,
regulation, or standard of the Occupational Safety and
Health Standards Board (OSHSB), or the Division of
Occupational Safety and Health (Cal/OSHA).
o Extend the requirement that employers pay one
additional hour for failure to provide a meal, rest or
recovery period as required by applicable statutes,
regulations, or standards of the OSHSB or Cal/OSHA.
Provide that rest or recovery periods mandated pursuant
to any statute, regulation, standard, or order of the IWC,
the OSHSB, or Cal/OSHA, shall be counted as hours worked
for which there shall be no deduction from wages. [IWC
orders already require - this bill would codify the
requirement]
Specify that employees working on a "piece-rate basis"
shall be compensated for rest periods by being paid his/her
average piece-rate wage during each pay period, or portion
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of, in which the employee was paid on a piece-rate basis.
Authorize a piece-rate worker, pursuant to a civil
action or a claim filed with the Division of Labor
Standards Enforcement, to recover his/her unpaid average
piece-rate wage for each rest or recovery period in which a
violation of these provisions occurred.
Provide that the provisions of this bill do not apply to
an employee whose wages, hours, and working conditions are
covered by a collective bargaining agreement that expressly
addresses rest or recovery periods for employees paid on a
piece-rate basis.
COMMENTS
1. Background on the IWC, the OSHSB and Cal/OSHA:
Under existing law, one of the functions of the Department of
Industrial Relations (DIR) is to foster, promote, and develop
the welfare of the wage earners of California, to improve
their working conditions, and to advance their opportunities
for profitable employment. Within DIR there are various boards
and divisions tasked with the execution of these requirements.
Industrial Welfare Commission (IWC):
It is the duty of the IWC to ascertain the wages, hours and
conditions of labor and employment in the various occupations,
trades and industries in which employees are employed in this
state. Through its seventeen (17) industry specific wage
orders, the IWC establishes requirements on hours and days of
work, minimum wages, reporting time, and meal and rest
periods, among others. While the IWC is currently not in
operation due to budget constraints, the Division of Labor
Standards Enforcement (DLSE) continues to enforce the
provisions of the wage orders.
Division of Occupational Safety and Health (also known as
Cal/OSHA):
Cal/OSHA protects workers and the public from safety hazards
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through its Occupational Safety and Health, elevator,
amusement ride, aerial tramway, ski lift and pressure vessel
inspection programs, and also provides consultative assistance
to employers.
Occupational Safety and Health Standards Board (OSHSB):
The Standards Board is the standard-setting agency within
Cal/OSHA tasked with the responsibility of adopting reasonable
and enforceable standards at least as effective as federal
standards to ensure a safe and healthful workplace for
employees.
Division of Labor Standards Enforcement (DLSE):
The DLSE is the entity responsible for the adjudication of
wage claims, investigation of discrimination and public works
complaints, and enforcement of Labor Code statutes and
Industrial Welfare Commission wage orders.
2. Rest Period Requirements in Statute, Standards and IWC Wage
Orders:
Each of the seventeen (17) IWC Wage Orders includes a section
on rest period requirements - authorizing non-exempt employees
to take a rest period at a rate of ten (10) minutes per 4
hours or major fraction thereof. According to the IWC wage
orders, authorized rest period time shall be counted as hours
worked for which there shall be no deduction from wages.
Existing Labor Code �226.7 prohibits an employer from
requiring any employee to work during any meal or rest period
mandated by an applicable order of the IWC. Furthermore, an
employer who fails to provide this meal or rest period is
required to pay the employee one additional hour of pay for
each work day that the meal or rest period is not provided.
In addition to the IWC orders and Labor Code �226.7, the Heat
Illness Prevention regulations established by the Occupational
Safety and Health Standards Board have an additional
requirement regarding a rest period applicable to all outdoor
places of employment. Since August 2005, employers in the
State of California have been required by regulation to
protect outdoor employees from the hazard of heat illness.
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This regulation was promulgated in response to unusually hot
summer temperatures over a wide area of the state which led to
a greatly elevated number of cases of serious heat illness in
the workplace, including a number of deaths. This regulation,
codified at Title 8 CCR �3395, came about first by adoption of
an emergency temporary standard and was followed by adoption
of a permanent standard in 2006. Under these regulations,
employees are allowed and encouraged to take a cool-down rest
in the shade for a period of no less than five minutes at a
time when they feel the need to do so to protect themselves
from overheating.
3. Are workers paid on "piece-rate basis" taking their meal and
rest periods?
According to the DLSE's Enforcement Policies and
Interpretations Manual, piece rate or piece work is a method
of payment based on units of production completed. However,
all requirements that apply to hourly employees also apply to
piece-rate employees - including meal and rest period
requirements.
Unfortunately, our state and country has been facing a
workplace enforcement crisis with violations of many of our
long-established labor protections. According to a 2010 report
published by the Institute for Research on Labor and
Employment at UCLA, titled Wage Theft and Workplace Violations
in Los Angeles, surveying 1,815 workers in Los Angeles County,
a large majority of L.A. respondents (89.6 percent) worked
enough consecutive hours to be legally entitled to a meal
break. However, 80.3 percent of at-risk workers and 69.8
percent of the total sample experienced a meal break violation
in the previous work week. Meal break violations took a
variety of forms, from receiving a shortened meal break to not
receiving one at all. Regarding a rest break, the survey found
that 81.7 percent of respondents eligible for rest breaks (and
77.3 percent of the full L.A. sample) were either denied a
break entirely or had a shortened break.
The UCLA report further revealed that pay-related violations
are often obscured by non-hourly pay arrangements and/or cash
payment in the absence of legally required statements of
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earnings and deductions. According to the report, informal pay
systems may facilitate minimum wage and other violations,
while making it harder for workers to claim their rights under
the law.
4. Need for this bill?
Although existing law affords employees - by statute,
regulation and standards - the ability and protections to take
a meal and rest period, there have been concerns raised
regarding rest periods not taken by employees paid on a
piece-rate basis. While a meal period is unpaid (as long as
the employee is relieved of all duty), rest periods are
construed as "hours worked" and must be compensated at the
employee's regular rate of pay. However, current law is silent
about how this requirement is supposed to be implemented for
industries paying on a piece-rate basis.
This bill would clarify that a piece rate worker is entitled
to be paid for a rest and recovery period and provides a
formula [average piece-rate] for determining compensation
rates for piece rate workers. Additionally, the bill would
prohibit an employer from requiring an employee to work during
any meal, rest or recovery period mandated by applicable
statute or regulation, standard, or order of the IWC, the
Occupational Safety and Health Standards Board, or the
Division of Occupational Safety and Health. Current law
requires this of IWC wage orders; this bill would simply add
to the prohibition any mandate by the OSHA Standards Board or
Cal/OSHA -- such as rest breaks found in heat illness
regulations.
By codifying the requirement that all rest periods be counted
as hours worked - for which there shall be no deduction of
wages - the Legislature would ensure that all workers entitled
to a rest period are paid for that time regardless of whether
the requirement appears in the IWC wage orders, statute or
regulations.
5. Suggested Committee Amendments:
Although Labor Code �512 requires an employer to provide its
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employees with a 30 minute meal period, without reference as
to whether the employee is exempt or non-exempt, the
Industrial Welfare Commission Wage Orders exclude employees
that satisfy specified executive, administrative, and
professional duties qualifying them for exemption. The IWC
wage order exempts these employees from wage and hour
requirements such as daily overtime and meal and rest periods.
However, the exclusions from such wage and hour mandates are
found solely in the IWC Wage Orders.
The author may wish to amend the bill to clarify that the
provisions of this bill do not change the applicability of
current law -- and exempt employees would continue to be
exempt.
The provisions of this bill would introduce the concept of a
"recovery period" as a new term in the Labor Code. Committee
staff suggests amending the bill to include a definition to a
"recovery period." Staff recommends the following:
As used in this section, "recovery period" means the cool-down
rest period afforded to employees to prevent heat illness.
6. Proponent Arguments :
According to proponents of the measure, this bill will clarify
how paid rest breaks and recovery periods are to be
compensated by employers when employees are paid on a piece
rate basis. Proponents argue that piece rate workers, unlike
their hourly or salaried counterparts, are often induced to
work through their rest or recovery periods because they
suffer a loss of income. They believe this bill is necessary
to increase incentives for piece rate workers to actually take
their rest and heat stress recovery periods rather than
'willingly' working through them to avoid losing money.
According to the sponsors of the measure, a 2004 CA Rural
Legal Assistance Foundation survey of more than 1,000 piece
rate farm workers laboring in the raisin harvest, found that
more than 70% of workers 'voluntarily' worked through rest
periods to avoid losing money. Nearly two-thirds of them said
they would be "more likely" to take rest periods if they were
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paid their average piece rate earnings during that time. The
sponsors argue that it is significant that these results were
obtained from surveying workers in Central Valley raisin
harvests where triple digit temperatures have resulted in farm
worker deaths from heat stress. They argue that while not all
piece rate workers potentially face a life or death decision
when they are not given their rest periods, compliance by
employers with these important state policies should not be so
insidiously undermined by the manner in which workers are
paid.
7. Opponent Arguments :
Opponents argue that this bill will threaten a new wave of
destructive and costly litigation to California employers by
including exempt employees under the one-hour penalty for
failure of an employer to provide a meal or rest period.
According to opponents, for over ten years, CA employers
suffered as a result of class action litigation regarding the
meaning of the term "provide" with regard to meal and rest
periods for hourly, non-exempt employees. With this bill,
opponents are concerned that the penalty provision of Labor
Code �226.7 would be significantly expanded to include exempt
employees by making the penalty available to not just those
employers that fail to comply with the IWC Wage Orders, but
also to any employer who fails to comply with statutory meal
and rest period requirements in Labor Code � 512.
Additionally, opponents contend that, as exempt employees,
employers do not track such employees' time, thereby making it
extremely difficult for employers to adequately and fairly
defend themselves in litigation. Opponents also argue that
the proposed definition of piece-rate is also extremely broad,
as it could include exempt employees who are paid, in part, a
production bonus based upon a specific unit of time, number of
items sold, or even certain amount of sales. Furthermore, they
argue that this bill could significantly increase costs for
employers who have employees with mandated periods of rest
that could be characterized as "recovery periods" subject to
compensation. For example, IWC Wage Order No. 5-2001 mandates
that an employee who works 24 consecutive hours must receive
at least 8 hours of off-duty time. It also states that an
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employee's time spent sleeping is not considered hours worked.
Opponents are concerned, that this bill would potentially
transform such time spent sleeping or the mandated 8 hours of
off-duty time as compensable, as a "recovery period."
8. Prior Legislation :
SB 1538 (Alarcon) of 2004: Vetoed by the Governor
Much like this bill, SB 1538 would have required employers to
pay employees for any rest period mandated by statute,
regulation, or order of the IWC and would establish the
formula by which the rate of pay would have been determined
for the rest periods of piece-rate workers in the agricultural
and garment industries, as specified.
AB 755 (De La Torre) of 2005: Vetoed by the Governor
Almost identical to SB1538, however, AB 755 does not enumerate
the formula that would have been used to determine the rate of
pay of piece-rate workers, but rather states that it be the
"average piece-rate" wage.
SUPPORT
California Rural Legal Assistance Foundation - Co-Sponsor
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Teamsters Public Affairs Council
Engineers & Scientists of California, IFPTE Local 20
International Longshore & Warehouse Union
National Lawyers Guild Labor & Employment Committee
Professional and Technical Engineers, IFPTE Local 21
United Farm Workers
United Food and Commercial Workers Western States Council
UNITE-HERE, AFL-CIO
Utility Workers Union of America, Local 132
OPPOSITION
Air Conditioning Trade Association
California Association of Winegrape Growers
California Chamber of Commerce
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California Framing Contractors Association
California Professional Association of Specialty Contractors
California Retailers Association
National Federation of Independent Business
Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
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Senate Committee on Labor and Industrial Relations