This question is a commonly asked question at Checkright. Most recently a vet asked me if she has a dog groomer, and the practice charges $50 per dog, can she pay the groomer a flat $25 per grooming job.
The answer to this question is yes, usually, with some compliance restrictions to keep in mind. The first item to review is that the employee must make minimum wage for any hour that he or she works. In our example, if the employee works 4 hours and does 2 groomings, he would make $50 for 4 hours, an effective rate of $12.50. As an employer, you would also need to be mindful of other duties scheduled during the work shift. For example, you probably can’t schedule that employee to walk dogs for an hour when they arrive and then do groomings for 4 hours as the piece rate applies to the particular task, not other general duties.
There was a well-publicized case where waitresses from a popular restaurant chain sued because they were required to come in at 4 and roll up forks in napkins and refill ketchup and salt on tables. The court ruled that even though they made more than minimum wage for the entire shift due to tips, there were no tips available during the “prep hour” and they had to be paid minimum wage for that hour. Secondly, employees must be paid time and half if they work over 40 hours per week, and that would apply to employees working at piece rate jobs also.
Back to our example, if the groomer worked 50 hours one week and did 20 groomings, he would have earned $500 in regular grooming fees over a 50 hour period for a straight rate of $10 per hour. For the 10 hours above 40 hours, the groomer would need to be paid time and a half for those 10 hours ($15 per hour) for a total weekly gross of $550 for that week. Once minimum wage and overtime have been addressed, the employee would be paid through payroll with normal tax withholdings.