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.