Archive for June, 2014

Piece Work, Day Rates and the Regular Rate. Part 2.

So let’s finish up piece work and day rates and job rates. So what happens if the employee gets a piece rate with an hourly minimum? In that case, the employee gets paid on a piece work basis unless he does not make a specific hourly rate for the workweek. If he or she does not produce enough to make the minimum for the week, the employee gets a guaranteed minimum hourly rate. Often that is the minimum wage, to avoid problems, but it can be more. As the regulations point out, what that really means is that in any workweek where the employee does not hit the minimum, what he or she is really doing is getting paid by the hour.

(b) Piece rates with minimum hourly guarantee. In some cases an employee is hired on a piece-rate basis coupled with a minimum hourly guaranty. Where the total piece-rate earnings for the workweek fall short of the amount that would be earned for the total hours of work at the guaranteed rate, the employee is paid the difference. In such weeks the employee is in fact paid at an hourly rate and the minimum hourly guaranty is the regular rate in that week. In the example just given, if the employee was guaranteed $11 an hour for productive working time, the employee would be paid $506 (46 hours at $11) for the 46 hours of productive work (instead of the $491 earned at piece rates). In a week in which no waiting time was involved, the employee would be owed an additional $5.50 (half time) for each of the 6 overtime hours worked, to bring the total compensation up to $539 (46 hours at $11 plus 6 hours at $5.50 or 40 hours at $11 plus 6 hours at $16.50). If the employee is paid at a different rate for waiting time, the regular rate is the weighted average of the 2 hourly rates, as discussed in §778.115.

29 CFR § 778.111(b).

So if the employee does not hit the minimum and you pay them the guaranteed rate, it’s the same calculation as if they were being paid an hourly rate. And in those workweeks in which the employee does produce over the minimum? In those weeks you use the calculation we talked about last week. And this is a good time to remind you that the workweek stands alone and that you don’t get to average over two workweeks in this case either. Just like you don’t get to average hours worked over two workweeks. And NO, it does not matter that you use a two week pay period. For minimum wage and overtime purposes, each workweek stands alone.

And that brings up a second point about pieceworkers. They must be paid at least the minimum wage for every hour worked in the workweek. Even if they don’t produce enough parts to make the minimum wage. Now that does not mean that if the employee misses for one hour in the workweek and goes over for every other hour in the workweek you have to pay him extra for that one hour. What it means is, at the end of the workweek, when you are figuring out how much the employee produced and what that converts to on an hourly basis, it has to average at least the minimum wage per hour. And once again, that is for EACH WORKWEEK, not averaged over two of them.

So how about day rates and job rates? Pretty easy.

If the employee is paid a flat sum for a day’s work or for doing a particular job, without regard to the number of hours worked in the day or at the job, and if he receives no other form of compensation for services, his regular rate is determined by totaling all the sums received at such day rates or job rates in the workweek and dividing by the total hours actually worked. He is then entitled to extra half-time pay at this rate for all hours worked in excess of 40 in the workweek.

29 CFR § 778.112.

Simple right? Total the amount received for the day or job rates, divide by total hours worked to get the regular rate and pay half time for everything over 40.

Next time we will start to get into salaries for non-exempt employees and it will get a bit more complicated.

Piece Work, Day Rates and the Regular Rate. Part 1. More Math, Ugh!

We started last time with some discussion of calculating the regular rate for hourly workers and hourly workers who got a weekly production bonus. Well, I guess technically last time we talked about the new minimum wage in Michigan, but you know what I mean. This time I want to talk about piece work and day rates and job rates.

Let’s start with pieceworkers. Why, you ask? Because that is the order of the Regulations. Good enough? So what is a pieceworker? According to Wiki, “A peaceworker is an individual or member of an organization that undertakes to resolve violent conflict, prevent the rise of new violent conflicts, and rebuild societies damaged by war.” Wait, wait, wait. Wrong kind of piece. A pieceworker is someone who is paid based on the number of widgets they make and not on an hourly rate. Let’s start by getting something out of the way right now: Yes, these people are still entitled to overtime if they work over 40 hours in a workweek and, yes, you have to figure it out using the regular rate.

The Reg is a bit longer and here it is:

(a) Piece rates and supplements generally. When an employee is employed on a piece-rate basis, the regular hourly rate of pay is computed by adding together total earnings for the workweek from piece rates and all other sources (such as production bonuses) and any sums paid for waiting time or other hours worked (except statutory exclusions). This sum is then divided by the number of hours worked in the week for which such compensation was paid, to yield the pieceworker’s “regular rate” for that week. For overtime work the pieceworker is entitled to be paid, in addition to the total weekly earnings at this regular rate for all hours worked, a sum equivalent to one-half this regular rate of pay multiplied by the number of hours worked in excess of 40 in the week. (For an alternative method of complying with the overtime requirements of the Act as far as pieceworkers are concerned, see §778.418.) Only additional half-time pay is required in such cases where the employee has already received straight-time compensation at piece rates or by supplementary payments for all hours worked. Thus, for example, if the employee has worked 50 hours and has earned $491 at piece rates for 46 hours of productive work and in addition has been compensated at $8.00 an hour for 4 hours of waiting time, the total compensation, $523.00, must be divided by the total hours of work, 50, to arrive at the regular hourly rate of pay – $10.46. For the 10 hours of overtime the employee is entitled to additional compensation of $52.30 (10 hours at $5.23). For the week’s work the employee is thus entitled to a total of $575.30 (which is equivalent to 40 hours at $10.46 plus 10 overtime hours at $15.69).

29 CFR § 778.111(a).

Again, we have a pretty straightforward computation. Take the total piece rate and any rate for non-productive hours (like waiting time or going to meetings) and divide it by the number of hours the employee worked in the workweek. That gives you the regular rate. Then you divide that in half and that is the additional overtime rate. And don’t forget, where you have already compensated the employee at the straight time rate for any work done in the overtime hours, you only have to add on the half-time as overtime. Look at the example above (or call your labor lawyer) if that confuses you.

What if the employee works at multiple piece rates in a week? For example he gets $1.00 per part for one kind of part and $1.25 per part for a second kind of part? Well, you average, or you can agree to pay overtime at time and one-half of the regular rate for whatever part is being produced during the overtime hours. That’s what that reference to §778.418 in the Regulation is.

(a) Under section 7(g)(1), an employee who is paid on the basis of a piece rate for the work performed during non-overtime hours may agree with his employer in advance of the performance of the work that he shall be paid at a rate not less than one and one-half times this piece rate for each piece produced during the overtime hours. No additional overtime pay will be due under the Act provided that the general conditions discussed in §778.417 are met and:

(1) The piece rate is a bona fide rate;

(2) The overtime hours for which the overtime rate is paid qualify as overtime hours under section 7(e) (5), (6), or (7);

(3) The number of overtime hours for which such overtime piece rate is paid equals or exceeds the number of hours worked in excess of the applicable maximum hours standard for the particular workweek; and

(4) The compensation paid for the overtime hours is at least equal to pay at one and one-half times the applicable minimum rate for the total number of hours worked in excess of the applicable maximum hours standard.

(b) The piece rate will be regarded as bona fide if it is the rate actually paid for work performed during the non-overtime hours and if it is sufficient to yield at least the minimum wage per hour.

(c) If a pieceworker works at two or more kinds of work for which different straight time piece rates have been established, and if by agreement he is paid at a rate not less than one and one-half whichever straight time piece rate is applicable to the work performed during the overtime hours, such piece rate or rates must meet all the tests set forth in this section and the general tests set forth in §778.417 in order to satisfy the overtime requirements of the Act under section 7(g) (2).

29 CFR § 778.418.

Basically, what this Regulation says is that you can agree with the employee IN ADVANCE (and I would do it in writing), that you can pay overtime and the piece rate for the pieces being made when the overtime is worked instead of doing the average. You can do this when the employee is paid at two different hourly rates in a single workweek and we will talk about that when we get to it.

Let’s stop here and finish up piece work and day rates and job rates next time.

More Minimum in Michigan

Sometimes when I do this thing I just write news.  I don’t try to be funny or entertaining, I just write the news.  The two or three of you that read this thing regularly know that I do that when something happens and I am just not that sure of how to make it funny or interesting and I feel like I need to write something about it.  Today is that day.

I know you have all read or seen or heard this by now, but I’m going to take a second, and I mean a second, to write about it anyway.  Michigan has raised its minimum wage.  The federal minimum wage stays the same (it was lower than Michigan’s anyway), but the state minimum wage is going up.  On May 27 the Legislature passed and Governor Snyder signed legislation that will, over the next 4 years, raise Michigan’s minimum wage to $9.25 per hour.  In addition, tipped workers will also get a bump in their minimum up from the current $2.65 to $3.52 per hour – something the Legislature forgot to deal with the last time they changed the minimum.

Finally, the new bill will index the minimum wage to inflation starting in 2019.  Depending on the rate of inflation in a given year, the minimum may go up by as much as 3.5%.

So, Steve, you just said the federal minimum wage stays the same.  Which one do I have to pay if I have employees in Michigan?  You have to pay the higher one.  Want to read more about that, here you go.