Failing to pay piece-rate workers the correct amount for overtime pay is a common wage and hour violation. Many employers pay only the per-piece amount, even when employees work over 40 hours per week. This scheme is not legal and deprives workers of the overtime premium they are entitled to under state and federal labor laws.
A recent example involved a Tempe, Arizona based window and door company that ended up paying $577,997 to 109 employees for overtime pay violations of the Fair Labor Standards Act’s (FLSA).
The claims against the company were based in part on the employer’s failure to pay overtime to employees who were paid on a piece-rate basis when they worked more than 40 hours in a work week. Contrary to what many believe or have been told by employers, there is no exception or exemption from the wage and overtime laws for piece-rate or per-unit pay, under either Arizona or federal law. Therefore, when an employer pays workers on a per-piece or per-unit basis, they still must track the employees’ hours and pay overtime (at least time and one-half) when they exceed 40 in a workweek. The issue then becomes – what is the correct and proper way to calculate overtime pay for an employee paid on a piece-rate basis.
How to Calculate Overtime When You are Paid a Piece-Rate
Step one is to determine your “regular rate” of pay. The regular rate of pay for an employee paid on a piecework basis is obtained by dividing the total weekly earnings by the total number of hours worked in that week. The employee is then entitled to an additional one-half times this regular rate for each hour over 40, plus the full piecework earnings.
Example: An employee paid on a piece-rate basis works 50 hours in a week and completes 50 pieces at a per-piece rate of $10, resulting in earnings of $500. The regular rate of pay for that week is $500 divided by 50, or $10.00 an hour. In addition to the straight-time pay, the employee is also entitled to $5.00 (half the regular rate) for each hour over 40 — an additional $50.00 for the 10 overtime hours — for a total of $550.
Another way to compensate pieceworkers for overtime, if agreed to before the work is performed, is to pay one and one-half times the piece rate for each piece produced during the overtime hours. The piece rate must be the one actually paid during non-overtime hours and must be enough to yield at least the minimum wage per hour.
Need Help Determining If You Should be Receiving Overtime Pay?
Although compliance with the wage and labor laws is technically the sole obligation of the employer, cases like the above highlight how important it is for workers to familiarize themselves with federal and state wage laws to protect their fair pay rights. There is a lot of money at stake on this issue and you should seek guidance from an overtime pay lawyer if you have any doubt as to compliance.
If you have questions or believe that you have been the victim of wage theft due to an improper piece-rate overtime pay scheme, contact us for a free and confidential review of your situation.
