Partner
Being paid based on production rather than by the hour does not automatically exempt you from overtime laws. Under federal and New York law, eligible piece-rate employees generally must receive overtime based on their regular rate of pay, which is calculated using their total earnings and hours worked during the workweek.
Key Takeaways
- Piece-rate employees may still qualify for overtime pay.
- Overtime is generally calculated using the employee’s regular rate of pay, not simply the number of pieces completed.
- Employers must accurately track hours worked, even when employees are paid by production.
- Incorrect overtime calculations may violate federal and New York wage laws.
- If you believe you have been underpaid, an employment lawyer can evaluate your rights.
What Does It Mean to Be Paid by Piece Rate?
Piece-rate employees are paid according to the amount of work they complete rather than the number of hours they work. For example, a worker may earn a set amount for each item assembled, package processed, garment sewn, or delivery completed.
While this compensation method rewards productivity, it does not eliminate an employer’s obligation to comply with wage and hour laws. In most cases, employers must still keep accurate records of employees’ hours and determine whether overtime compensation is owed.
Do Piece-Rate Employees Qualify for Overtime?
In many cases, yes. The Fair Labor Standards Act (FLSA) and the New York Labor Law generally require employers to pay nonexempt employees overtime when they work more than 40 hours in a workweek. The method of compensation does not determine whether overtime is required. Instead, the key question is whether the employee is exempt from overtime under applicable law.
Simply paying an employee by the piece instead of by the hour does not eliminate overtime obligations.
How Is Overtime Calculated for Piece-Rate Employees?
For eligible employees, overtime is generally based on the employee’s regular rate of pay.
The regular rate is typically calculated by dividing the employee’s total earnings for the workweek, including piece-rate earnings and other qualifying compensation, by the total number of hours worked that week. Once the regular rate is determined, the employer calculates the additional overtime premium required for hours worked over 40.
For example, if an employee earns $1,000 through piece-rate work during a 50-hour workweek, the employer generally begins by calculating the employee’s regular hourly rate before determining the additional overtime premium owed for the 10 overtime hours.
Because different forms of compensation may affect the calculation, determining the correct overtime amount can become complicated.
What Laws Protect Piece-Rate Employees?
Several laws protect employees who are paid by piece rate.
The Fair Labor Standards Act (FLSA) establishes federal minimum wage and overtime requirements for most nonexempt employees.
In addition, the New York Labor Law provides wage protections for employees, including overtime requirements for eligible workers. Employers generally must comply with both federal and state law, applying whichever standard provides greater protection to the employee.
These laws also require employers to maintain accurate payroll and time records, making proper recordkeeping an important part of overtime compliance.
What Overtime Mistakes Do Employers Commonly Make?
Errors involving piece-rate compensation are not uncommon. Some employers misunderstand how overtime should be calculated, while others fail to keep adequate records of hours worked.
Common mistakes include:
- Paying only the piece rate for overtime hours.
- Failing to calculate the employee’s regular rate correctly.
- Not tracking hours worked.
- Misclassifying employees as exempt from overtime.
- Excluding certain compensation when calculating the regular rate.
Any of these mistakes may result in employees receiving less overtime pay than the law requires.
What Should You Do if You Think Your Overtime Was Calculated Incorrectly?
If you believe your employer has underpaid your overtime, keep copies of records that may help establish your earnings and hours worked.
Helpful documentation includes:
- Pay stubs
- Time records
- Work schedules
- Production or piece-rate records
- Payroll statements
- Written communications regarding your compensation
These records may help determine whether your overtime was properly calculated under applicable wage laws.
When Should You Speak With an Employment Lawyer?
You may wish to speak with an employment lawyer if you regularly work more than 40 hours each week but receive only your piece-rate earnings, your employer refuses to explain how your overtime is calculated, or you believe payroll records are inaccurate.
Legal guidance may also be appropriate if your employer retaliates after you question your wages or request overtime pay. An attorney can evaluate whether your compensation complies with federal and New York law and explain the legal remedies that may be available.
Trust Lipsky Lowe to your pay practices, explain your rights under federal and New York law, and discuss your legal options. If you believe your employer failed to pay the overtime you earned, contact us today for a confidential consultation.
Frequently Asked Questions
Do piece-rate employees receive overtime pay?
Yes, many piece-rate employees are entitled to overtime if they are classified as nonexempt and work more than 40 hours in a workweek. Overtime is generally based on the employee’s regular rate of pay rather than solely on the number of pieces completed.
Can an employer avoid paying overtime by using piece-rate pay?
No. Paying employees by production instead of by the hour does not automatically eliminate overtime obligations under federal or New York law.
Does New York require overtime for piece-rate employees?
Generally, yes. Eligible nonexempt employees working in New York are typically entitled to overtime regardless of whether they are paid hourly, by salary, by commission, or by piece rate.
How far back can I recover unpaid overtime?
The amount of time you may have to recover unpaid overtime depends on the laws that apply and the specific facts of your case. An employment lawyer can evaluate your claim and explain the applicable deadlines.