When hourly paid workers take their legally authorized and permitted California IWC mandated rest breaks, it is the employer who pays for these rest breaks. Up until now, when employees were paid by production or piece-rate and took a break, it was the employees who ended up paying for it — as they ceased to earn while taking these breaks. This explains why workers paid by the hour have no trouble stretching their break time. It also explains why some piece-rate paid workers historically have skipped theirs.
But recent California rulings now require that employers pay for these rest breaks. As Farm Bureau associate counsel and labor law specialist Carl Borden explained in a recent Ag Alert, “employers in California must pay employees, in addition to their piece-rate earnings, at least minimum wage for all non-piece-producing work time.”
I believe it is in the employer’s interest to pay for the time used in breaks. Besides the employee goodwill earned, I suspect that the cost of these paid breaks will be more than made up for by savings related to increased productivity and reduced instances of workplace illness and injury.
In addition to these rest breaks, other non-productive periods that need to be compensated include “heat illness prevention cool-down breaks, required daily exercises, donning and doffing required safety clothing or equipment, travel time between fields, company-controlled standby or waiting time and company meetings such as for safety training or job training,” according to Robert P. Roy, general counsel for the Ventura County Agricultural Association.
There are at least three general options for complying with these new rulings. From my corner, only the first two options are beneficial; the third hurts both the farm enterprise and the people they employ. Properly designed piece-rate pay systems are vital in helping California agriculture compete internationally. Whatever approach is used must protect effectively-designed incentive pay systems.
1. Add a separate wage for rest periods
Keep track of non-productive time (such as break periods) and pay an additional wage rate equal to or greater than the minimum wage. For instance, if employees earn two 10-minute breaks a day, add at least one-third of an hour at the minimum wage level for that day. In order to take full advantage of these rest breaks, make sure that employees take them and are not just paid for them. This pay approach is particularly useful for compensating employees for non-break-related, non-productive time periods (e.g. employee training, company-mandated downtime).
2. Add a separate productivity equivalent for rest periods
Employees take their breaks, but are paid proportionally to what they would have earned if they had kept working on a piece-rate basis. This option means that very highly-productive employees earn more for their rest periods than slower ones. (Everyone, of course, must earn at least a minimum wage equivalent for this time.) It is as if the farm employer is telling the workers: “While you take your rest period, you can pretend you are out there working, except you are actually taking a break.” Once again, it is imperative that employees actually take these break periods.
Research I have conducted shows that many workers are weary of showing employers what they really can do under piece rate. They fear that pay rates will be reduced if they earn too much. This approach of paying a productivity equivalent for rest periods helps employers drive the message that increased productivity is a win for both employees and management. This pay approach would not be sustainable, however, for compensation of other non-productive time, nor would it be sustainable if rest periods were longer.
3. Hourly wage-plus-production bonus
On the surface, this seems like the simplest way to deal with the new regulations. Farm employers would pay by the hour (again, at least the minimum wage) and add a production bonus over that. Over the years, I have known numerous farm employers who have implemented such an hourly wage-plus-production bonus. The long-term results tend to be disastrous. The faster workers end up subsidizing the slow ones. Few employers have done the math, and even fewer have designed such pay schemes on purpose: to try and punish their best employees. Option 3 is not sustainable and will increase worker dissatisfaction.
Piece-rate pay, when properly designed, has the potential for greatly-increased productivity with resulting benefits for both employer and employee. However, multiple principles need to be carefully balanced in order to maintain such a system. Any competitive advantages that may be obtained through an incentive pay system, such as piece-rate pay, may be easily lost through unintended side effects. This is why I am often weary of changes brought about by rule of law.
Paying for a short break through either Option 1 or 2 may well help farm employers attract and retain good workers and motivate performance. For short rest breaks, I have a preference for Option II, proportional payment related to employee productivity. Two advantages are rewarding particularly fast and effective employees and overcoming historical worker perceptions about piece-rate pay. For heat illness prevention cool-down breaks, for longer breaks and for other types of non-productive time compensation, I prefer Option 1 — adding a separate wage to the piece-rate pay earnings.
Despite the apparent ease in bookkeeping associated with Option 3 — payment of a base hourly wage plus a productivity bonus — this option will create much worker discontent, especially among the more productive workers. Under this system, the greater the employee’s productivity, the less he is paid for his efforts.
Gregorio Billikopf is a labor management farm advisor for the University of California. He may be reached at email@example.com.