Employer Performance-Based Rate Scheme for Automobile Repair Upheld Under California Law

With many of the easy targets for wage and hour matters gone (e.g., misclassification of assistant managers), plaintiffs’ counsel have increasingly turned to technical overtime or minimum wage violations as a vehicle to bring class or collective action litigation. As a recent claim reflects, that doesn’t always work, particularly where the challenged practices actually help the employees.

In Certified Tire and Service Centers Wage and Hour Cases, the employer paid its automotive technicians a guaranteed minimum plus a potentially higher rate based on various performance metrics. Thus, workers always earned above the minimum wage, but the amount above that might fluctuate based on their performance that workweek. The difference could be substantial, with some workers making $70 per hour during some workweeks. The employees clocked in and out for lunch but received breaks without clocking out.

So far, you may be thinking that the case involves some quirk by which employees earned below the minimum wage or less than the required overtime. Or perhaps they were accusing the employer of forcing them to work off the clock in some fashion. Neither was so. Instead, relying on case law limiting the use of the averaging of hourly rates in California, the employees alleged that during their breaks they had no opportunity to earn additional credit under the formula that would increase their regular rate. Put another way, the employees agreed that they were paid the minimum wage or more during their breaks, but complained that they had no way to increase that rate during those breaks. They filed two cases in which the courts granted class certification, but after consolidation and a bench trial, the trial court concluded that the scheme did not violate California law.

The court of appeals affirmed. It noted at the outset that the workers always received at least the minimum wage and that the formula simply determined how much above the minimum wage they would earn. Thus, the court distinguished the case from those in which workers received no compensation during certain times (such as travel to work sites) or pure piece-rate cases. The court of appeals thus affirmed the trial court’s decision to dismiss the case.

The Certified Tire case reflects three important things. First, it shows that employers can prevail even if a wage and hour class has been certified. Second, it is an example of a creative employer finding a way to navigate some of California’s difficult obstacles to performance- or productivity-based pay (although in this instance, the matter still resulted in litigation). Third, it reflects one of the increasing difficulties in wage and hour litigation, which is claims being brought over alleged technical violations of the law based on contorted mathematics or logic. Here, there was no question that employees were always paid above the minimum wage, there was no dispute over overtime and hardworking employees could do very well. Yet it still took two lawsuits and five years for the courts to conclude that the employer never violated the law.

The bottom line:

Even in California, and even with claimed technical violations, an employer can prevail at trial, but it may take a while.