Piece Rate Pay

Federal Judge Gardner of the United States District Court for the Eastern District of Pennsylvania ordered kgb USA, Inc. to pay $1.3 million in minimum wage for violations of the Fair Labor Standards Act (“FLSA”). Kgb USA is the world’s biggest provider of directory assistance which hired workers to respond to text messages from the company’s customers. The workers worked out of their homes throughout the United States.

The federal court found that the company misclassified the home workers as independent contractors rather than employees. As employees, the workers were entitled to at least minimum wage of $7.25 per hour. However, the investigation found that the company paid the workers on a piece rate basis based upon the amount of text messages to which they responded regardless of the number of hours they worked. When the workers’ hourly rate was calculated, it was discovered that the company was not providing the workers with at least $7.25 per hour in violation of the FLSA.

Acting Secretary of Labor Seth Harris stated that “misclassification of workers as independent contractors is a serious threat to their livelihood. Misclassifying workers also undercuts responsible employers who must compete with unscrupulous employer who do not obey the law.”

On December 1, 2012, the law firm filed an overtime lawsuit on behalf of mortgage modification processors who were not paid overtime. The complaint alleges that the loan processors were paid a set fee for each stage the file was in as of payday but that they were not compensated an additional amount for hours worked over 40 in a workweek in violation of Section 216(b) of the Fair Labor Standards Act of 1938 (“FLSA”).

For example, the processors were paid $100 for each file that was approved for mortgage modification by the lender, $20 for each file that was denied for modification by the lender, $50 for each file for which the lender postponed a foreclosure, etc. However, although the processors allege that they worked well over 40 hours each week, their pay did not change to compensate for overtime hours.

Under the federal FLSA overtime laws, being paid per file or per job is called “piece rate” pay. Compensating employees on a piece rate basis is allowed under the FLSA. However, employers must still pay piece rate employees for overtime work. These employees are entitled to one-half of the regular rate of pay for each overtime hour plus the amount of their regular piece rate pay. This means that if an employee who is paid on a piece rate basis works 50 hours in a workweek and earns $500, their regular hourly rate amounts to $10. Therefore, the piece rate employee would be entitled to an additional $5 per overtime hour or a total of $50 for that week.
Continue Reading ›

Articles Posted in Piece Rate Pay

Directory Assistance Company kgb USA, Inc. Must Pay $1.3 Million In Owed Minimum Wage To Wrongly Classified “Independent Contractors”

Overtime Lawsuit Filed On Behalf Of Mortgage Loan Modification Processors Paid On A “Piece Rate” Basis.