A new law that will bar piece rate compensation for garment workers in California is on the horizon. The new law is a part of a larger trend away from tying wages to output and could spell the end of piece rate pay in the Golden State, attorneys say.
Beginning in January of 2022, California garment manufacturers and their contractors will be required to pay workers at least the applicable minimum wage instead of paying by units produced.
Current minimum wage rates in California are at $14 an hour for companies with 26 or more workers and $13 an hour for companies with 25 workers or fewer. Each wage will increase by $1 next year.
While the state’s labor code provides for piece rate compensation, the new law is the latest in a string that question the validity of such pay rates, said Michael Nader, shareholder at Ogletree Deakins.
“A majority of the Legislature seems to believe that any sort of objective performance metrics are inherently illegal,” he said. “What piece rate does is it really does reward the top performers better than they would make if they’re just being paid by the time worked.”
The bill was co-sponsored by The Garment Worker Center, which was signed into law by Gov. Newsome in September.
Policy directory for the California Employment Lawyers Association, Mariko Yoshihara, points to a study from 2016 titled “Dirty Threads, Dangerous Factories: Health and Safety in Los Angeles’ Fashion Industry,” which called for the elimination for piece rate compensation after finding it had “created new opportunities for wage theft and contributed to an unsafe and unhealthy workplace.”
Yoshihara further claimed that “It’s important to have legislation that is really led by the workers in that industry, and allowing them to speak for what working conditions and changes in law that they want to see,” she said.
In addition to the garment industry, we see many employers rethinking piece rate compensation because there are no longer a lot of advantages to maintain that pay structure in California. As said by Mark Phillips, partner at Reed Smith LLP, “The benefits of piece rate pay have been gradually diminishing over the last decade or two. Compliance on wage and hour law in California when you have a piece rate system is more difficult now than it was 15, 20 years age.”
In 2016, A.B. 1513 amended the state’s labor code to require employers using piece rate pay to compensate workers with hourly wages during rest and recovery breaks and other “nonproductive time.”
In September, Newsom also signed A.B. 701 into law, which targets logistics and consumer delivery businesses and stipulates that employees cannot be forced to meet quotas that prevent them from taking their meal or rest breaks, using the bathroom or complying with safety regulations.
Pay systems based on quotas or piece rates can lead to exploitation of low-wage workers because it’s easy to manipulate those systems to avoid paying minimum wage, Yoshihara said.
It may be time for employers of all industries to leave the piece rate pay model, as Phillips said “Even for an employer outside the garment industry, now is the time to review pay practices and consider moving toward a compensation system that makes it easier to maintain compliance in California.”