The U.S. Department of Labor (DOL) has issued an opinion letter to help employers understand and calculate overtime for employees who are paid on a piece-rate basis where workers have both productive and non-productive work hours.
Piece rate compensation is generally intended to encourage productivity by offering higher compensation to employees who can get more work done. It is common in construction, manufacturing, and other industries where the skill and initiative of an individual worker can greatly impact the rate of production. However, in some circumstances piece rate workers may have a lack of work for periods of time when they are otherwise “on the clock.” For example, construction workers may be idle while awaiting material delivery. Some employers provide a separate hourly rate for such periods, while others consider the piece rate compensation for the workweek to cover all hours worked, including those non-productive periods.
The opinion letter addresses how employers may determine overtime rates when accounting for non-productive time as well as important employee communication considerations.
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