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Wage and Hour Class Action Development in the Automotive Repair Arena

Downtown LA Motors had a practice of paying their auto service  technicians  a “book rate” for performing maintenance work on customer cars. This is called “piece work” pay. The employer averaged the income received by the mechanics over their normal pay period, and if the average hourly rate was above California’s minimum wage, then they did not pay their mechanics for the time spent keeping busy, doing work that was not billed at a book rate. This could have been washing cars, making dealership deliveries, taking inventory, clearing their work areas up, etc.  The trial court concluded, and the court of appeal agreed, that California law does not allow the employer to avoid paying its employees for all hours worked by average total compensation over total hours worked in a given pay period.

California’s wage orders are set forth by the Industrial Welfare Commission (IWC) and they are considered quasi-legislative. As such, the court examined the intent of these orders, and declared that the orders are set forth in order to protect workers’ general welfare and “society’s interest in a stable job market.” The court focused on Wage Order Number 4, which holds that “Every employer shall pay to each employee, on the established payday for the period involved, not less than the applicable minimum wage for all hours worked in the payroll period, whether the re-numeration is measured by time, piece, commission or otherwise.”  The order goes on to define “hours worked” as the time during which an employee is subject to the control of the employer and includes all the time the employee is allowed or permitted to work.

An amicus brief filed by an organization of which I am proud to be a member, The California Employment Lawyer’s Association, argued that the plain meaning of the term “all hours worked” is “each and every hour” and that the technicians need to have been separately compensated for those hours. The court distinguished a federal court decision which allowed averaging over the pay period (for agricultural workers who spent much time in transit to and from the fields and for which they were not separately compensated) and found that the Fair Labor Standards Act specifically allowed for a pay period calculation.  The court also found that California Labor Code Sections 221, 222, and 223 require that employees be paid at either the statutory or agreed rate and prohibits employers from using any part of the rate as a credit against the minimum wage obligation.

The dealership was found to have intentionally failed to pay all wages due at the time of termination and was ordered to pay waiting time penalties. The employer’s mistaken but good faith belief that it had not violated the law was not sufficient to save it from paying affected employees 30 days’ waiting time penalties from the date of their separation of employment.

As always, this blog is not legal advise and should be considered educational in nature. Only an attorney licensed in your state and familiar with your facts can give you valid legal advise. We practice throughout California and represent employees only.

-Steve