April 29, 2025 • 12 mins
The federal Fair Labor Standards Act (FLSA) requires employers to compensate non-exempt employees at least the minimum wage for each hour worked and pay them overtime (at 1.5 times the employee’s regular rate of pay) whenever they work more than 40 hours in a workweek. The amount employees should receive in pay cannot be determined accurately without knowing the number of hours worked. This can be especially tricky when the employee is paid on a piece-rate basis or has waiting time or on-call time during the workweek. To help you navigate these situations, listen in as we cover:
- [01:00] Defining a piece-rate employee
- [02:56] Minimum wage rules for piece-rate employees
- [03:49] Tracking hours for piece-rate employees
- [04:24] Calculating overtime for piece-rate employees
- [05:16] Waiting time
- [07:20] On-call time
This content is based on generally accepted HR practices, is advisory in nature, and does not constitute legal advice or other professional services. ADP does not warrant or guarantee the accuracy, reliability, and completeness of the content. Employers are encouraged to consult with legal counsel for advice regarding their organization's compliance with applicable laws. This content is current as of the published date.
Copyright © 2025 ADP, Inc. All Rights Reserved. The ADP logo, ADP, RUN Powered by ADP, and HR{preneur} are registered trademarks of ADP, Inc. and its affiliates. All other marks are the property of their respective owners.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Jim (00:00):
To comply with federal, state, and local minimum wage and overtime
laws, employers must calculatethe number of hours worked by
non-exempt employees accurately.
This can be especially tricky when theemployee is paid on a piece rate basis
or has waiting time or on-call timeduring the work week to help employers.
This podcast episode will provideguidelines for paying employees
(00:22):
in these special situations.
Welcome to HRPreneur.
I'm Jim Duffy.
From Main Street to Your Street,the HRPreneur Podcast is centered
around helping small businesseslike yours gain the knowledge you
seek from hr, payroll, and hiring totime, taxes, benefits, and insurance.
Today we'll talk with ourguest, Meryl Gutterman, about
three special pay situations.
(00:43):
Meryl is Senior Counsel with ADP's HCMGroup, and once again, Meryl, as always,
it's great to have you back on the show.
Meryl (00:50):
Hi, Jim.
Thanks for having me back.
It's great to be here today with you.
Jim (00:54):
So we are here today to talk about three special pay situations.
One of those is payingpiece rate employees.
Could you please start off by describingwhat a piece rate employee is?
Meryl (01:07):
Sure employees paid on a piece rate or a piece work basis are
compensated by tasks performed or bynumber of units that are produced.
Uh, some examples of piece ratearrangements could include nurses who
are paid on the basis of the numberof procedures that they perform.
Um. Carpet layers paid by the yard of
(01:27):
carpet that they lay, or technicians
that are paid by the number ofcable units that they install.
Uh, factory workers that may be paidby the widget that they complete,
or carpenters that are paid bylinear foot on framing jobs are
also considered piece rate workers.
But it's important to know that state lawmay prohibit some employers from using
(01:51):
a piece rate to pay certain employees.
For example, in California, typicallyCalifornia prohibits employers from paying
garment workers on a piece rate basis.
So you wanna make sure thatyou're checking with your state
law to help with your compliance.
Jim (02:06):
Excellent point.
So Meryl, how does an employerensure that they are complying
with minimum wage requirements whenthey pay on a piece rate basis?
Meryl (02:15):
Well, to ensure that piece rate employees are earning at least the minimum
wage, employers need to divide the totalpiece rate compensation for the work week
by the number of hours that are worked.
And since an employee's productivity andwork hours can fluctuate, this calculation
has to be done for each work week.
If the result is less than theapplicable minimum wage, then the
(02:36):
employer has to make up the difference.
Jim (02:38):
So it sounds like tracking these employees hours is still very important.
Meryl (02:42):
That's right.
It's still really important.
Even though these employees aren't beingpaid by the hour, their hours of work
still have to be tracked closely andaccurately to ensure compliance with any
minimum wage and overtime requirement.
Jim (02:55):
So Meryl, can you shed some light on the issues around pay for rest
breaks since non-exempt employees restbreaks must be paid as hours worked.
How does an employer factor thisin when determining whether they
have met minimum wage requirementswith piece rate employees?
Meryl (03:12):
That's a great question, Jim.
One common way that piece rate agreementsviolate the law is when they don't
take into account non-productivetime that has to be compensated
with at least the minimum wage,such as rest breaks or time spent in
training meetings, or even time spent
in work-related travel.
(03:34):
So employers should make sure thatthey require piece rate and other
non-exempt employees to record and reportboth productive work time as well as
non-productive work time that how it'sdefined under federal and state law.
Jim (03:48):
And to clarify something, there must the employer pay non-productive work time
at the same rate as productive work time.
Meryl (03:55):
Well under federal law, employers and employees can agree to compensate
non-productive work hours at a rate that'slower than the rate for productive work,
as long as it's at least the minimum wage.
But keep in mind too, thatstates may have their own rules.
So for example, in California, Californiahas enacted a law that among other
things, requires employers to compensateemployees for rest and recovery periods
(04:19):
separate from any piece rate compensation.
Jim (04:22):
Meryl.
That's good to know.
Uh, can you tell us about overtime?
How is overtime pay calculatedfor piece rate employees?
Meryl (04:29):
Well under federal law, the regular rate of pay for an employee paid on a
piece work basis is obtained by dividingtheir total weekly earnings by the total
number of hours worked in that week.
The employees entitled to anadditional 0.5 times this regular
rate for each hour over 40.
Plus the full piece work earnings.
And then another way to compensatepiece workers for overtime under federal
(04:53):
law if agreed to before the work isperformed, is to pay one and a half
times the piece rate for each pieceproduced during the overtime hours.
The piece rate must be the oneactually paid during non overtime
hours and must be enough to yieldat least the minimum wage per hour.
Jim (05:14):
Thank you for clarifying that, Meryl.
So let's move on to waiting time.
When does waiting timeneed to be considered?
Hours worked and thereforepaid under federal law?
Meryl (05:23):
Whether the time an employee spends waiting is considered hours worked under
federal law, depends on the circumstances.
And keep in mind again, that statesmay have their own rules about
when waiting time is compensable.
When federal and state rules conflict,then the rule that's most beneficial
to the employee typically applies.
And under federal law, if the facts showthat the employee was engaged to wait.
(05:47):
The time should be considered hours workedaccording to the US Department of Labor.
This means the employee is waitingfor work to do or for repairs to
be made while they're on duty.
Uh, for example, if you have areceptionist who reads a book while
waiting for customers or telephonecalls, or a messenger who's
doing a crossword puzzle while waiting forassignments, or if you have a firefighter
(06:09):
who's playing checkers while waiting foremergency calls, or a factory worker who
talks to fellow employees while waitingfor machinery to be repaired, or if
you have a wait person in a restaurantwaiting for customers to arrive.
So all of those are examples of inactivityand the inactive time is hours worked.
Even if the employee is allowed to leavethe premises or the job site during
(06:31):
such periods of inactivity, that'sbecause the period during which the
inactivity occurs is unpredictable,and it's usually of short duration.
So the employee is unable to use thetime effectively for their own purposes.
Jim (06:45):
So Meryl, when isn't waiting time, considered hours worked under federal law.
Meryl (06:49):
The Department of Labor says that waiting time isn't considered
hours worked under federal law.
If the employee iscompletely relieved of duty.
The time period is long enough toallow the employee to use the time
effectively for their own purposes.
And if you're not sure, you shouldbe consulting legal counsel to
help make that determination.
The employee is
(07:09):
definitively told in advance thatthey may leave the job and the
employee is advised of the time thatthey're required to return to work.
Jim (07:18):
Thank you for that, Meryl.
So let's turn to our third andfinal topic for today, which is
paying employees for on-call time.
Could you briefly definewhat on-call time is?
And then if you wouldn't mind, pleasetell our listeners when it must be paid.
Meryl (07:33):
No problem.
On-call
time generally means that
the employee is available to becontacted to work if necessary,
but they're not formally on duty.
So under federal law, an employee whois required to remain on call on the
employer's premises or so close to theworkplace that they can't use the time
effectively for their own purposesis considered a worker on call and
(07:58):
all of the time is considered hoursworked and therefore has to be paid.
Jim (08:02):
So what about an employee who is on call but at home?
Does their inactive on-calltime need to be considered
hours worked under federal law?
Meryl (08:12):
That depends.
An employee who is required toremain on call at home isn't
necessarily working while on call.
The inactive of time might notbe considered hours worked if the
employee is still able to use thaton-call time effectively for their
own purposes, according to guidancefrom the Department of Labor.
The employer may require the employeewho is on call at home to be accessible
(08:35):
by phone without the inactive timebeing considered hours worked.
But employers need to be carefulabout any restrictions that they put
on such employees because additionalrestrictions on the employee's freedom
could require that the inactivetime be considered hours worked.
Jim (08:51):
That makes sense.
Uh, so can you give us someexamples of when pay may be
required for inactive on-call time.
Meryl (08:59):
Sure.
Let's say the employee is interruptedwith work calls to such an extent,
or is required to report to work soquickly that they can't conduct their
regular personal activities so theycan't cut the grass or go to the movies
or go to a ball game or engage inanother activity of their choosing.
(09:19):
That inactive time may need to beconsidered hours worked, and again,
if you're not sure, you shouldbe consulting legal counsel to
help you make that determination.
Jim (09:28):
Thank you Meryl.
That was great.
We covered a lot ofground, as I normally do.
I, uh, take notes, uh, for our listenersso that I can recap, uh, in summary
here, so I'll run through the list.
First piece here is to ensurethat piece rate employees are
earning at least a minimum wage.
Employers must divide their totalpiece rate compensation for the work
(09:48):
week by the number of hours worked.
The second note here is, um, employersshould make sure they require
piece rate employees to record andreport both productive work time
and non-productive work time asdefined by federal and state law.
The.
A third point I noted hereis to calculate overtime pay.
(10:08):
The regular rate of pay for anemployee paid on a piecework basis
is obtained by dividing their totalweekly earnings by the total number
of hours worked in that week.
The employee is entitled to anadditional 0.5 times this regular
rate for each hour over 40 hours.
Plus the full piece work earnings.
Another way to compensate piece workersfor overtime under federal law if agreed
(10:33):
to before the work is performed, is topay 1.5 times the piece rate for each
piece produced during the overtime hours.
The piece rate must be the oneactually paid during the non overtime
hours and must be enough to yieldat least the minimum wage per hour.
Three more points I covered.
(10:53):
As I said, we covered a lot ofground here for waiting time.
If the facts show that an employeewas engaged to wait, the time
must be considered hours worked.
This means the employee iswaiting for work to do or for
repairs to be made while on duty.
For example, as you pointed out,the wait person in a restaurant
waiting for customers to arrive.
(11:14):
Another point was for on-call time anemployee who is required to remain on
call on the employer's premises or soclose to the workplace, that they cannot
use the time effectively for their ownpurposes, is working while on call and
all of the time is considered hoursworked and therefore must be paid.
And the last point I, uh, I took fromyour notes was that, uh, for an employee
(11:39):
who is required to remain on call athome, the inactive time might not be
considered hours worked if the employeeis still able to use the on-call time
effectively for their own purposes.
I. So again, Meryl, how'd I do there?
Meryl (11:53):
You did great.
You captured it all really well.
Thanks, Jim.
Great.
Jim (11:56):
Thank you again for your time and for stopping in today.
Presented by ADP HRpreneur focuseson the entrepreneurs and business
drivers who are shaping the growthof their companies and positively
impacting the lives of their employees.
With each episode, we'llbring the experts to you.
We'll answer your questions.
And help you think beyond today so youcan discover more success tomorrow.
(12:18):
Thanks also to our listeners forjoining us for today's episode.
Be well, and we hopeyou'll join us again soon.
To comply with federal, state, and local minimum wage and overtime
laws, employers must calculatethe number of hours worked by
non-exempt employees accurately.
This can be especially tricky when theemployee is paid on a piece rate basis
or has waiting time or on-call timeduring the work week to help employers.
This podcast episode will provideguidelines for paying employees
(00:22):
in these special situations.
Welcome to HRPreneur.
I'm Jim Duffy.
From Main Street to Your Street,the HRPreneur Podcast is centered
around helping small businesseslike yours gain the knowledge you
seek from hr, payroll, and hiring totime, taxes, benefits, and insurance.
Today we'll talk with ourguest, Meryl Gutterman, about
three special pay situations.
(00:43):
Meryl is Senior Counsel with ADP's HCMGroup, and once again, Meryl, as always,
it's great to have you back on the show.
Meryl (00:50):
Hi, Jim.
Thanks for having me back.
It's great to be here today with you.
Jim (00:54):
So we are here today to talk about three special pay situations.
One of those is payingpiece rate employees.
Could you please start off by describingwhat a piece rate employee is?
Meryl (01:07):
Sure employees paid on a piece rate or a piece work basis are
compensated by tasks performed or bynumber of units that are produced.
Uh, some examples of piece ratearrangements could include nurses who
are paid on the basis of the numberof procedures that they perform.
Um. Carpet layers paid by the yard of
(01:27):
carpet that they lay, or technicians
that are paid by the number ofcable units that they install.
Uh, factory workers that may be paidby the widget that they complete,
or carpenters that are paid bylinear foot on framing jobs are
also considered piece rate workers.
But it's important to know that state lawmay prohibit some employers from using
(01:51):
a piece rate to pay certain employees.
For example, in California, typicallyCalifornia prohibits employers from paying
garment workers on a piece rate basis.
So you wanna make sure thatyou're checking with your state
law to help with your compliance.
Jim (02:06):
Excellent point.
So Meryl, how does an employerensure that they are complying
with minimum wage requirements whenthey pay on a piece rate basis?
Meryl (02:15):
Well, to ensure that piece rate employees are earning at least the minimum
wage, employers need to divide the totalpiece rate compensation for the work week
by the number of hours that are worked.
And since an employee's productivity andwork hours can fluctuate, this calculation
has to be done for each work week.
If the result is less than theapplicable minimum wage, then the
(02:36):
employer has to make up the difference.
Jim (02:38):
So it sounds like tracking these employees hours is still very important.
Meryl (02:42):
That's right.
It's still really important.
Even though these employees aren't beingpaid by the hour, their hours of work
still have to be tracked closely andaccurately to ensure compliance with any
minimum wage and overtime requirement.
Jim (02:55):
So Meryl, can you shed some light on the issues around pay for rest
breaks since non-exempt employees restbreaks must be paid as hours worked.
How does an employer factor thisin when determining whether they
have met minimum wage requirementswith piece rate employees?
Meryl (03:12):
That's a great question, Jim.
One common way that piece rate agreementsviolate the law is when they don't
take into account non-productivetime that has to be compensated
with at least the minimum wage,such as rest breaks or time spent in
training meetings, or even time spent
in work-related travel.
(03:34):
So employers should make sure thatthey require piece rate and other
non-exempt employees to record and reportboth productive work time as well as
non-productive work time that how it'sdefined under federal and state law.
Jim (03:48):
And to clarify something, there must the employer pay non-productive work time
at the same rate as productive work time.
Meryl (03:55):
Well under federal law, employers and employees can agree to compensate
non-productive work hours at a rate that'slower than the rate for productive work,
as long as it's at least the minimum wage.
But keep in mind too, thatstates may have their own rules.
So for example, in California, Californiahas enacted a law that among other
things, requires employers to compensateemployees for rest and recovery periods
(04:19):
separate from any piece rate compensation.
Jim (04:22):
Meryl.
That's good to know.
Uh, can you tell us about overtime?
How is overtime pay calculatedfor piece rate employees?
Meryl (04:29):
Well under federal law, the regular rate of pay for an employee paid on a
piece work basis is obtained by dividingtheir total weekly earnings by the total
number of hours worked in that week.
The employees entitled to anadditional 0.5 times this regular
rate for each hour over 40.
Plus the full piece work earnings.
And then another way to compensatepiece workers for overtime under federal
(04:53):
law if agreed to before the work isperformed, is to pay one and a half
times the piece rate for each pieceproduced during the overtime hours.
The piece rate must be the oneactually paid during non overtime
hours and must be enough to yieldat least the minimum wage per hour.
Jim (05:14):
Thank you for clarifying that, Meryl.
So let's move on to waiting time.
When does waiting timeneed to be considered?
Hours worked and thereforepaid under federal law?
Meryl (05:23):
Whether the time an employee spends waiting is considered hours worked under
federal law, depends on the circumstances.
And keep in mind again, that statesmay have their own rules about
when waiting time is compensable.
When federal and state rules conflict,then the rule that's most beneficial
to the employee typically applies.
And under federal law, if the facts showthat the employee was engaged to wait.
(05:47):
The time should be considered hours workedaccording to the US Department of Labor.
This means the employee is waitingfor work to do or for repairs to
be made while they're on duty.
Uh, for example, if you have areceptionist who reads a book while
waiting for customers or telephonecalls, or a messenger who's
doing a crossword puzzle while waiting forassignments, or if you have a firefighter
(06:09):
who's playing checkers while waiting foremergency calls, or a factory worker who
talks to fellow employees while waitingfor machinery to be repaired, or if
you have a wait person in a restaurantwaiting for customers to arrive.
So all of those are examples of inactivityand the inactive time is hours worked.
Even if the employee is allowed to leavethe premises or the job site during
(06:31):
such periods of inactivity, that'sbecause the period during which the
inactivity occurs is unpredictable,and it's usually of short duration.
So the employee is unable to use thetime effectively for their own purposes.
Jim (06:45):
So Meryl, when isn't waiting time, considered hours worked under federal law.
Meryl (06:49):
The Department of Labor says that waiting time isn't considered
hours worked under federal law.
If the employee iscompletely relieved of duty.
The time period is long enough toallow the employee to use the time
effectively for their own purposes.
And if you're not sure, you shouldbe consulting legal counsel to
help make that determination.
The employee is
(07:09):
definitively told in advance thatthey may leave the job and the
employee is advised of the time thatthey're required to return to work.
Jim (07:18):
Thank you for that, Meryl.
So let's turn to our third andfinal topic for today, which is
paying employees for on-call time.
Could you briefly definewhat on-call time is?
And then if you wouldn't mind, pleasetell our listeners when it must be paid.
Meryl (07:33):
No problem.
On-call
time generally means that
the employee is available to becontacted to work if necessary,
but they're not formally on duty.
So under federal law, an employee whois required to remain on call on the
employer's premises or so close to theworkplace that they can't use the time
effectively for their own purposesis considered a worker on call and
(07:58):
all of the time is considered hoursworked and therefore has to be paid.
Jim (08:02):
So what about an employee who is on call but at home?
Does their inactive on-calltime need to be considered
hours worked under federal law?
Meryl (08:12):
That depends.
An employee who is required toremain on call at home isn't
necessarily working while on call.
The inactive of time might notbe considered hours worked if the
employee is still able to use thaton-call time effectively for their
own purposes, according to guidancefrom the Department of Labor.
The employer may require the employeewho is on call at home to be accessible
(08:35):
by phone without the inactive timebeing considered hours worked.
But employers need to be carefulabout any restrictions that they put
on such employees because additionalrestrictions on the employee's freedom
could require that the inactivetime be considered hours worked.
Jim (08:51):
That makes sense.
Uh, so can you give us someexamples of when pay may be
required for inactive on-call time.
Meryl (08:59):
Sure.
Let's say the employee is interruptedwith work calls to such an extent,
or is required to report to work soquickly that they can't conduct their
regular personal activities so theycan't cut the grass or go to the movies
or go to a ball game or engage inanother activity of their choosing.
(09:19):
That inactive time may need to beconsidered hours worked, and again,
if you're not sure, you shouldbe consulting legal counsel to
help you make that determination.
Jim (09:28):
Thank you Meryl.
That was great.
We covered a lot ofground, as I normally do.
I, uh, take notes, uh, for our listenersso that I can recap, uh, in summary
here, so I'll run through the list.
First piece here is to ensurethat piece rate employees are
earning at least a minimum wage.
Employers must divide their totalpiece rate compensation for the work
(09:48):
week by the number of hours worked.
The second note here is, um, employersshould make sure they require
piece rate employees to record andreport both productive work time
and non-productive work time asdefined by federal and state law.
The.
A third point I noted hereis to calculate overtime pay.
(10:08):
The regular rate of pay for anemployee paid on a piecework basis
is obtained by dividing their totalweekly earnings by the total number
of hours worked in that week.
The employee is entitled to anadditional 0.5 times this regular
rate for each hour over 40 hours.
Plus the full piece work earnings.
Another way to compensate piece workersfor overtime under federal law if agreed
(10:33):
to before the work is performed, is topay 1.5 times the piece rate for each
piece produced during the overtime hours.
The piece rate must be the oneactually paid during the non overtime
hours and must be enough to yieldat least the minimum wage per hour.
Three more points I covered.
(10:53):
As I said, we covered a lot ofground here for waiting time.
If the facts show that an employeewas engaged to wait, the time
must be considered hours worked.
This means the employee iswaiting for work to do or for
repairs to be made while on duty.
For example, as you pointed out,the wait person in a restaurant
waiting for customers to arrive.
(11:14):
Another point was for on-call time anemployee who is required to remain on
call on the employer's premises or soclose to the workplace, that they cannot
use the time effectively for their ownpurposes, is working while on call and
all of the time is considered hoursworked and therefore must be paid.
And the last point I, uh, I took fromyour notes was that, uh, for an employee
(11:39):
who is required to remain on call athome, the inactive time might not be
considered hours worked if the employeeis still able to use the on-call time
effectively for their own purposes.
I. So again, Meryl, how'd I do there?
Meryl (11:53):
You did great.
You captured it all really well.
Thanks, Jim.
Great.
Jim (11:56):
Thank you again for your time and for stopping in today.
Presented by ADP HRpreneur focuseson the entrepreneurs and business
drivers who are shaping the growthof their companies and positively
impacting the lives of their employees.
With each episode, we'llbring the experts to you.
We'll answer your questions.
And help you think beyond today so youcan discover more success tomorrow.
(12:18):
Thanks also to our listeners forjoining us for today's episode.
Be well, and we hopeyou'll join us again soon.
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