United States: Peace For Piece-Rate Employers In Washington

Last Updated: September 24 2019
Article by John Ellis and Paul S. Cowie

On September 5, 2019, the Washington Supreme Court issued a huge win for all non-agricultural employers who pay commission or piece-rate pay to their employees in Washington state. In a 6-3 decision, the Washington Supreme Court held in Sampson v. Knight Transportation (No. 96264-2) that a non-agricultural piece-rate employer complies with the Washington Minimum Wage Act when an employee's total earnings in given workweek divided by the employee's total hours worked in the same workweek exceeds the applicable minimum wage rate. While this conclusion may seem obvious, the Washington Supreme Court in 2018 rejected the same workweek averaging method for agricultural workers. Carranza v. Dovex Fruit Co., 190 Wn. 2d 612 (2018) held that the Washington Minimum Wage Act ("MWA") requires agricultural workers earning piece-rate pay to be separately compensated on an hourly basis for all "activities outside of piece-rate [] work." The question in Sampson was whether the holding in Carranza should be extended to non-agricultural piece-rate employers. Relying on a regulation promulgated over 40 years ago by the Washington Department of Labor & Industries ("DLI"), the Washington Supreme Court held that Carranza's separate compensation rule is confined to the narrow context of agricultural employment.

FACTS AND HISTORY

In Sampson, the Defendants are trucking companies that pay many of their employees, in part, on a per-trip piece-rate basis. The Plaintiffs alleged that the trucking companies' trip based pay compensates drivers only for time spent driving, and that non-driving worktime must be separately compensated on an hourly basis under the MWA. The employers disputed Plaintiffs' characterization of the trip-based pay as compensating for driving time only, and argued that WAC 296-126-021, a 1974 DLI regulation, allows non-agricultural employers to workweek average. The District Court acknowledged that WAC 296-126-021 permits workweek averaging for non-agricultural piece-rate pay, but believed that the Washington Supreme Court's Carranza decision had called the validity of WAC 296-126-021 "into question." The District Court therefore certified the following question to the Washington Supreme Court: "Does the Washington Minimum Wage Act require non-agricultural employers to pay their piece-rate employees per hour for time spent performing activities outside of piece-rate work?"

WORKWEEK AVERAGING APPROVED

In a 6-3 decision authored by Justice Mary I. Yu, the Washington Supreme Court answered the certified question in the negative. The Court held that "WAC 296-126-021 implements the MWA and allows employers to use workweek averaging to measure compliance with the MWA for nonagricultural workers paid on a piecework basis." The Court relied on the fact that the DLI had long interpreted WAC 296-126-021 and the MWA to measure minimum wage compliance for non-agricultural piece-rate employers on a workweek basis, and the Court rejected the unnatural tortured interpretation of WAC 296-126-021 put forth by the Plaintiffs. The Court further held that WAC 296-126-021 is consistent with the MWA, which states only that Washington employees must be paid "at a rate of not less than $[x] per hour," and that Carranza is distinguishable because the case was limited to agricultural workers, to whom WAC 296-126-021 is inapplicable. The Court noted that the DLI had a reasonable basis for distinguishing agricultural from non-agricultural employers in its regulations due to concerns unique to the agriculture industry. The Court also rejected the Plaintiffs' argument that WAC 296-126-021 cannot validly implement the MWA because it was promulgated under the authority of a separate Washington wage and hour statute, the Industrial Welfare Act. A three justice dissent agreed that WAC 296-126-021 permits workweek averaging, but would have struck down the regulation as inconsistent with the MWA as construed by Carranza.

TAKEAWAYS

The Washington Supreme Court's ruling is highly significant for any non-agricultural employer in Washington paying either piece-rate or commission wages. Although Sampson specifically addresses piece-rate pay, the case upholds the validity of WAC 296-126-021 which applies equally to employees receiving commissions. For non-agricultural employers, Sampson aligns Washington's MWA with the federal Fair Labor Standards Act, which has long been interpreted by the federal Department of Labor and several Circuit Courts of Appeals to measure minimum wage compliance on a workweek basis. Had the Washington Supreme Court came out the other way, piece-rate and commission employers would have had to end traditional piece-rate and commission pay plans and either pay hourly or restructure their plans to ensure hourly compensation at the minimum wage rate for all worktime a court might deem "outside of piece-rate work."

However, it may still be the case that non-agricultural piece-rate and commission employers in Washington must pay separate hourly compensation for rest break time. The Washington Supreme Court in Lopez Demetrio v. Sakuma Bros. Farms, Inc., 183 Wn. 2d 649 (2015) unanimously held that agricultural piece-rate employers must separately compensate for rest break time at a rate equal to the average rate of pay excluding rest break time, relying on language in the DLI regulation requiring rest breaks for agricultural employees stating that breaks must be on "on the employer's time." The DLI regulation requiring rest breaks for non-agricultural workers includes the same "on the employer's time" language construed in Lopez Demetrio for agricultural workers, and a few federal district courts have applied Lopez Demetrio to non-agricultural work. Because Sampson is based on the MWA and WAC 296-126-021, not the regulation requiring breaks "on the employer's time," the holding of Lopez Demetrio may still be good law and apply to non-agricultural employers.

Sheppard Mullin represented Knight Transportation before the Washington Supreme Court in Sampson.

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