Employees who are paid on a piece rate are entitled to overtime. A "piece rate" is where the employee is paid a fixed amount of money for a given piece of work. This includes employees who are paid "flag rate" for work. A "flag rate" is generally seen in the automotive servicing industry where an employee is paid the standard "book rate" or "flag rate" for a job, no matter how many hours the job takes. For instance, if performing an oil service on a truck has a book rate of 2 hours, and the employee is paid this 2 hours of work no matter how long the job takes, this is an example of a piece rate. This employee would be entitled to overtime whenever more than 8 hours in the day or 40 hours in the week were worked. The overtime is computed based on actual hours worked, and not based on how many "flag hours" were worked.
Employers sometimes call piece rate "commissions" in an attempt to convince employees that they are not entitled to overtime. However, commissions are only earned from sales work, and any "commissions" that are paid for actually performing the work will be seen as a piece rate. In addition, many commissioned salespeople are still entitled to overtime, so just because you earn a "commission" does not automatically mean you don't get overtime. .
Computing overtime for piece rate work
There are two valid methods for paying overtime on piece rate work. The first, and less common, is to pay an overtime rate for each piece produced during overtime hours. That is, if you are paid $1.00 per widget you make, then it is legal to pay you $1.50 per widget for widgets produced after you have worked 8 hours in the day or 40 hours in the week. The problem with this method is that it requires the employer to track when each piece is produced. In addition, if pieces take a long time to produce, it can mean that the overtime rate is paid for the entire piece, even though only a portion was worked in overtime hours.
For the above reasons, the more common way of seeing overtime paid for piece rate is by computing the regular rate of pay. The general rule for computing the regular rate of pay for piece work is that you take the total compensation that you are paid during a week and divide it by the total number of hours worked in that week. This rate is your "regular rate of pay" on which overtime is computed. Please see the following page for examples of how the regular rate is computed under different circumstances.
Finally, it should be noted that piece rate workers are entitled to minimum wage, which is currently $8.00/hr. Thus, your employer must verify each pay period that you made at least minimum wage from your piece rate work and pay you the difference if you did not.
The Paystub must show you the information you need to verify your wages
Many employers violate the Labor Laws by not paying overtime to piece rate workers. However, even when overtime is paid to the employee, frequent violations occur because the employer does not print the required information on your pay check stub. California law requires that certain information be printed on every pay check stub so that the employee can easily verify that the wages were paid correctly for that period. In the case of piece rate workers, the employer must print the total number of hours worked as well as how many pieces you produced and the rate you were paid for each piece. It is legal for this information to be on a separate piece of paper than the paycheck stub itself, but it must be given to the employee at the same time as the paycheck. This information will allow you to easily verify that you were paid at least minimum wage and that your regular rate of pay was computed properly. If your employer is not providing you this information, you can pursue a claim for damages and/or penalties of up to $100 for each pay period in which you were not provided this information.