A software update is now available that changes how rest & recovery pay rates are calculated for a pay period with two different minimum wage rates, using the Daily Minimum Wage calculation method, when employees have earned at or near minimum wage.
Weekly Minimum Wage Adjustments
When minimum wage rules are applied using the Weekly Method, adjustments will be calculated based on the Minimum Wage of the last date worked. This means that if an employee works through the 31st of December, the program will apply a minimum wage of $13 (California) to all of his wages.
If the employee works through one day in January, then the program will apply a minimum wage of $14 (California) to all of the wages for the week, even those hours worked in December. This means the Rest & Recovery Rates on all days will also be adjusted to the new minimum wage if the employee worked one day in the new year.
This program change does not affect the behavior of R&R calculations using the Weekly Minimum Wage Method.
Daily Minimum Wage Adjustments
When using the Daily Minimum Wage method, the program makes daily minimum wage adjustments based on the effective rate for the date worked. However the Rest & Recovery rate would still be an average calculation based on the entire workweek (California – Regular Rate of Pay, Washington – Average Piecework Rate). Therefore in some cases the R&R rate could be above the minimum wage for dates worked in the previous year but below the minimum wage for the new year.
In this situation, the Daily Payroll Batch Report will now adjust the R&R rate on days worked on or after a new minimum wage goes into effect if the rate doesn’t meet the minimum wage. Employees will be paid the minimum wage for those days.
The following excerpt from the Daily Payroll Batch Report shows a simple example where an employee earned minimum wage in both 2020 ($13/hour) and 2021 ($14/hour). The regular rate of pay is $13.50 for the workweek. That is the rate that is paid for the break time in 2020. However, because it is below the new minimum wage of $14/hour in 2021, the break taken in 2021 is paid at that rate instead of $13.50/hour:
This change was made to be consistent with the instructions given in the California Piece-Rate Compensation FAQ, which says that rest and recovery must be paid at the higher of the “average hourly rate” or the “applicable minimum wage”.