Piece-Rate Safe Harbor Payments Under Legal Challenge

Sacramento, Calif., (April 20, 2017) – A case filed in federal district court for the Central District of California challenges the 4% calculation method for safe-harbor payments under AB 1513.

In Juan Sandoval et al. v David M Lanier et al., Case No. 5:16-cv-02309, a group of agricultural employees filed a class-action lawsuit alleging that the 4% method of calculating back-pay payments to piece-rate employees under the safe-harbor provisions does not accurately compensate employees for wages they are owed and allows an employer to pay them less than they are entitled.

The safe-harbor provisions of AB 1513 for compensating piece-rate employees for uncompensated nonproductive time (NPT) allowed an employer to either compensate employees for the actual amount of NPT due between July 1, 2012, and Dec. 31, 2015, or calculate 4% of the employee’s gross wages in piece-rate pay periods during that time and pay that amount as full compensation for the NPT.

After selecting one of the two methods and following the guidelines for repayment, an employer obtained the ability to assert an affirmative defense to claims for recovery of wages, damages, liquidated damages, statutory penalties, or civil penalties for uncompensated NPT.

In this case, plaintiffs allege the 4% method does not fully compensate them and that the only permissible method should be the actual amount due method.

The lawsuit claims that by allowing employers to use the 4% method and have a safe-harbor defense, the defendants violated the United States Constitution by engaging in an unlawful taking under the Fifth Amendment and allowed employers to violate the Contracts Clause. Plaintiffs further allege that the 4% method of calculation violates the Supremacy Clause because it conflicts with provisions in the Migrant and Seasonal Agricultural Worker Protection Act.

What This Means for Employers: This case was filed on November 4 and is still in the early stages of the litigation process. If successful, the constitutional challenge could undo the safe-harbor affirmative defense obtained by employers who used the 4% calculation method. Employers who used that method should watch this case closely, as it may affect their ability to defend themselves in pending or future litigation.

Source: FELS Newsletter, April 2017

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