The Ninth Circuit asked the Washington Supreme Court to answer “whether an employer’s payment plan, which includes as a metric an employee’s ‘production minutes,’ qualifies as a piecework plan under Washington Administrative Code Section 296-126-021.”

In an opinion today, the Court answers, “no.” A dissent argues that the answer should be “yes.” The disagreement arises because the Minimum Wage Act regulations (WAC 296-126-021) don’t “define what compensation schemes fit within the meaning of piecework pay.” When a company pays a piece rate, workers are paid per unit of work (apples picked, for example). If that ends up being less than the minimum wage, the employer must make up the difference. As the opinion notes, Washington “permits workweek averaging to determine minimum wage compliance for commission or piece rate workers.” (High producing hours offset low producing hours.)

The question before the Court is part of a Xerox employee’s wage dispute being heard in federal court. Xerox pays Federal Way call center employees by the “production minute”—the time they spend handling calls. The company considers this Achievement Based Compensation (ABC) plan to be piece rate “because the plan compensates call center workers a ‘fixed amount’ (their per minute ABC rate) on a ‘per unit of work’ measurement—and it describes the unit as the ‘production minute.’”

The Court holds that the Minimum Wage Act

. . . does not permit employers to use clock time as a ‘unit of work’ for piece rate pay. A contrary rule would allow WAC 296-126-021’s limited exception for workweek averaging to swallow up the general rule barring workweek averaging for hourly employees. Under Xerox’s interpretation, employers would be able to pay their workers less than minimum wage for each hour worked—something they are not allowed to do under the hourly system—simply by classifying portions of the employees’ work time as piece rate units.

In a dissent, Justice Stephens argues that “production minutes” should qualify as a piecework plan “because they are functionally a metric of production, not a measurement of time, as they are ‘tied to the employee’s output.’” (Emphasis in original.)

Further, Justice Stephens doesn’t agree

. . . with the majority’s assumption that employers will use time-based production units as a strategy for circumventing minimum wage laws. . . . To qualify as a piecework plan, compensation measured by work minutes must be tied directly to some productivity metric, such as the ‘production minutes’ at issue in this case. Here, Xerox markets and sells a specific product to Verizon—a ‘production minute.’ Verizon in turn pays Xerox for the number of ‘production minutes’ Xerox generates. Federal Way employees produce each ‘production minute’ that is eventually sold to Verizon. The entire business model involves the same unit of production . . . .

(Citation omitted.)

This isn’t the first time in recent years the Court has been asked questions about piece rate work and the minimum wage. For example, in Lopez Demetrio v. Sakuma Brothers Farms (2015), the state Supreme Court held, “employers must pay employees for rest breaks separate and apart from the piece rate.” And, “rest breaks for pieceworkers [must] be paid at least at the applicable minimum wage or the employee’s regular rate, whichever is greater.”

Additionally, in Carranza v. Dovex Fruit Co. (2018), the Court held that for agricultural workers, “Time spent performing activities outside the scope of piece-rate picking work must be compensated on a separate hourly basis.” And, “The rate of pay for time spent performing activities outside of piece-rate picking work must be calculated at the applicable minimum wage or the agreed rate, whichever is greater.”