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Overview
Piece rate compensation refers to a payment method where employees are paid based on productivity, rather than on the number of hours worked. Piece rate compensation is common in the trucking industry, with many companies paying drivers based upon metrics such as miles driven and stops made. In recent years, however, the legality and rules that must be followed to legally pay on a piece rate basis have changed substantially. Such laws vary significantly from state to state in the United States.
Jurisdiction-specific supply chain challenges
Federal law
Under the Fair Labor Standards Act, piece rate payment is generally legal so long as piece rate employees receive at least the federal minimum wage when their earnings are averaged across all hours worked. If the piece rate earnings do not meet the minimum wage threshold, the employer must make up the difference under federal law. Additionally, unless they are otherwise exempt, piece rate employees are entitled to overtime pay.
Examples of states with specific piece rate requirements
- California
- California has stringent laws for piece rate compensation. First, California does not allow for averaging; rather, piece rate employees must be paid at least minimum wage for each hour and minute of work. Second, employers must pay piece rate employees for rest and recovery periods and other nonproductive time separately from their piece rate earnings at statutorily specified rates. These requirements make paying on a piece rate basis very difficult in California.
- Employers must provide detailed wage statements that include all the information required under Labor Code section 226 and the total hours of rest and recovery periods, nonproductive time and the corresponding pay rates for each item.
- New York
- The Empire State requires that piece rate employees receive at least minimum wage for each hour worked. Employers also must ensure that piece rate workers are paid for overtime at the appropriate rate of pay.
- Detailed wage statements are required, which must include the number of units and the corresponding piece rate earnings, among other things.
- Washington
- Washington State law requires that piece rate employees be paid at least the state minimum wage for all hours worked. In addition, employers must pay for rest breaks separately.
- Detailed wage statements are required, showing the number of units produced, piece rate earnings and pay for rest breaks, among other things.
Impact on employers of truck drivers: Employers of truck drivers who are compensated on a piece rate basis and drive across state lines face unique challenges due to varying state laws. Here are some key considerations:
- Employers often must ensure compliance with the piece rate compensation laws of each state the driver operates in. This can be complex, as drivers may cross multiple state lines in a single trip.
- Detailed record keeping is essential to track the hours worked and units produced in each state to ensure compliance with state-specific requirements.
- States such as California and Washington require separate compensation for rest and recovery periods. Employers must account for these periods and ensure drivers are paid accordingly, even when crossing state lines.
- States have differing requirements regarding the information employers must provide on wage statements. Thus, those laws should be reviewed to ensure appropriate compliance.
Conclusion
The use of piece rate compensation for truck drivers is common in the transportation industry to drive productivity. Employers who employ truck drivers and pay on a piece rate basis must carefully review the specific state laws in each impacted state to ensure compliance.
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