Wage and Hour Division (WHD)

**FOH** Field Operations Handbook

**Chapter
64** Employment of Workers with Disabilities at Special Minimum Wages
under Section 14(c)

**Section 64i** Establishing Piece Rates and Personal, Fatigue and Delay Allowances

Section 64i01: Allowance for Nonproductive Time (PF&D) - Required only for Piece Rate Time Studies

- Defining Personal, Fatigue and Delay Factor (PF&D)
- Normal fatigue prevents all employees from producing at their most rapid pace throughout the workday. In addition, breaks, cleanup time, and delay time while materials are being restocked or the finished products are removed all reduce the amount a worker can produce.
- Employers must take this nonproductive time into consideration when determining piece rates by including what is known as a
**Personal, Fatigue, and Delay (PF&D) factor**. Regulations 29 CFR Part 525.12(h)(2)(ii) states that when determining piece rates "appropriate time shall be allowed for personal time, fatigue, and unavoidable delays. Generally, not less than 15% allowances (9 - 10 minutes per hour) shall be used in conducting time studies." - A properly computed piece rate will include a PF&D that also takes into account time spent by workers for traditional breaks or rest periods (ten to fifteen minute breaks). When the PF&D factor has been accurately computed, the employer need not pay additional wages for these breaks. PF&D does not include or cover "down time" as discussed in FOH 64e01(b)(1).
- Employers who fail to provide the required allowance, or provide an insufficient allowance, are at an unfair competitive advantage to employers who do give an adequate PF&D allowance. If the INV finds that a facility under investigation failed to make a proper allowance for PF&D when performing time studies to determine piece rates, that employer has most likely paid employees less than the commensurate rate and may have incurred a back wage liability under section 14(c).
- WH will not object to an employer establishing a PF&D that is greater than required by the regulations as this would result in the worker with a disability receiving wages above the applicable commensurate wage.

- The INV should determine whether the PF&D allowance used in the time study is large enough to cover all nonproductive time that constitutes hours worked (such as waiting for more materials, taking coffee breaks, or waiting while adjustments are made to machines). Even though the facility may have made an allowance, if the INV finds nonproductive work time in excess of this allowance, the facility has most likely paid employees less than the commensurate rate and may have incurred a back wage liability under section 14(c). Should the INV encounter a situation where it appears a 9 or 10 minute PF&D is not sufficient for the type of work being performed, he or she should, following established procedures, discuss this with the RO Section 14 Team Leader prior to taking any action.
**The PF&D allowance**is incorporated into the piece rate to be paid workers with disabilities by either:- Multiplying the standard time it takes a worker who does not have a disability to perform a task by an allowance factor,
**or by** - Multiplying the number of units produced by the worker who does not have a disability by an allowance percentage.

- Multiplying the standard time it takes a worker who does not have a disability to perform a task by an allowance factor,
- To calculate a piece rate, the facility divides the prevailing hourly wage by the average hourly production rate (meaning the average number of units produced in a fifty or fifty-one minute hour by a worker who does not have disabilities). More detail is provided below.

Example.Three workers who do not have disabilities are each timed for 50 minutes. They produce a total of 840 units. Average productivity is 280 (840 divided by 3). If the prevailing wage is $8 per hour, the piece rate would be .0286 ($8 divided by 280 units). A worker with a disability who produced 185 units in an hour would earn $5.291 in that hour (185 multiplied by .0286 per unit).

Note that in this example the exact piece rate (.0285714) was**rounded up**to $.0286 per piece. WH will not normally question computations that are carried out to the fifth decimal point and then**rounded up**to four decimal places. Regulations 29 CFR Part 525.12(h)(1)(ii) states that piece rates "shall not be less than the prevailing piece rates-." For this reason, piece rates are always rounded up, even though the digit to be rounded is less than the numeral five. For example, .04934 should be rounded to .0494 (see FOH 64g06(f)). Because this practice differs from usual rounding procedures, employers sometimes make an error when computing piece rates.**Errors in rounding piece rates often result in a back wage liability**.

The example above is meant to demonstrate correct rounding practices used when computing piece rates. The INV will note that the commensurate rate was $5.291 in this example, more than the current section 6(a)(1) minimum wage of $5.15 per hour. The employer would be in compliance with the FLSA if he or she paid the worker with the disability $5.15 per hour rather than the commensurate rate of $5.291. The section 14 employer is not legally obliged by the FLSA to pay a commensurate rate in excess of the applicable section 6(a) minimum wage. - A direct way to arrive at the ten-minute allowance is to use the 50-minute hour. The formula using the 50 minute hour is:

(# Units Produced / # minutes) X 50 minutes = hourly production standard

For 75 units produced in 15 minutes, the hourly production standard is 250 units:

(75 units / 15 minutes) X 50 minutes = 250 units per (50 minute) hour. - In some cases it may not be possible to do a 25-minute work observation and simply multiply by two to arrive at a 10-minute PF&D allowance. For example, there may be a job for which the employer has established a standard of 200 units per 50-minute hour, but there are only enough available materials to observe 100 units being produced. In that case the INV should compute an average time per unit from his or her observation and compare it to the average time per unit expected to be produced in a 50-minute hour (3,000 seconds). By dividing 3,000 seconds by 200 units, it is determined that it takes 15 seconds to produce each unit (3,000 seconds divided by 200 units equals 15 seconds per unit). This means that in 15 minutes (900 seconds), the employee may be expected to produce 60 units.
- There may be a case where it appears that there are enough raw materials to observe three workers who do not have disabilities for 20 minutes, but not 25. If the employer is using a 10-minute allowance for PF&D, the average number of units produced in 20 minutes should be multiplied by 2.5 to arrive at the standard for that work observation. That standard can then be compared to the standard set by the employer's time study.

- The INV must be able to evaluate the variety of methods employers use in their attempt to provide an adequate PF&D allowance. The simplest method of providing an adequate PF&D allowance is described above, the 50 or 51 minutes hour. However, the INV may encounter more complex methods. One distinction the INV should note is the difference between an
**allowance factor**and an**allowance percentage**. Much confusion results when employers mistakenly use the two interchangeably.**Allowance factor**. An "allowance factor" represents a formula used by employers to provide the "allowance percentage" in their time studies.**Allowance percentage**. An "allowance percentage" takes into account that**portion**of the total time available for work that is not actively productive due to the worker's personal time (breaks), fatigue, and unavoidable delays. Unavoidable delays include anything that prevents the worker from working - such as waiting for materials, equipment breakdowns, socializing, etc. The nine or ten minutes an hour PF&D required by the regulations equates to 15% (9 minutes divided by 60 minutes) or 16.67% (10 minutes divided by 60 minutes) of an hour respectively.

**Allowance Factor**. A 9-minute PF&D allowance is equivalent to 15% of an hour and a 10-minute allowance is equivalent to 16.67% of an hour. However, employers sometimes attempt to satisfy the PF&D requirement by using**allowance factors**of 1.15 or 1.1667 as equivalents to 9 or 10 minute**allowance percentages**. Use of either of these allowance factors results in an overstatement of the normal expected productivity of the worker who does not have a disability.- The following example demonstrates how using an
**incorrect**allowance factor unfairly reduces the wages of a worker paid a SMW.

**Example**. Suppose that it takes 10 seconds for an individual without a disability to perform an assembly process. The 10 seconds per assembly would be the "standard time" to perform the process. The employer wishes to add a 15% allowance to the standard time to account for PF&D. Some work center employers will multiply the standard time by an "allowance factor" of 1.15 thinking they are providing the 15% PF&D allowance. This has the effect of changing the "standard time" to 11.5 (10 x 1.15) seconds per assembly. When 3,600 seconds (60 minutes) is divided by 11.5 seconds per assembly, the result in "normal expected productivity" is 313.04347 assemblies per hour.

However, suppose that, instead, 3,060 seconds (51 minutes) is divided by 10 seconds per assembly. The result is 306 assemblies per hour, a difference of 7.04347 assemblies per hour. Multiplied by the number of hours worked per day, days per week and weeks per year, this error would result in a significant loss of wages to the worker with a disability performing the assemblies. - The
**correct**"allowance factor" for a 51 minute hour (a 9 minute, or 15%, allowance) is actually 1.1764705, computed as follows:

60 minutes / (60 minutes - 9 minutes) = 1.1764705

Continuing the same example, if the employer multiplies the "standard time" of 10 seconds per assembly by the correct "allowance factor" of 1.1764705 (representing a 9 minute, or 15%, allowance), the result is 11.1764705 seconds per assembly. Dividing 3,600 seconds (60 minutes) by 11.1764705 seconds results in 306.00002 units per hour. Thus the requirement of providing a 15% PF&D allowance has been met. - The same logic applies when an employer claims to have given an allowance of 10 minutes per hour by applying a factor of 1.1667 to the standard time of the worker who does not have a disability. The correct allowance factor for a 10-minute PF&D (or 16.67% of an hour) allowance is
**not**1.1667, but 1.20, computed as follows:

60 minutes / (60 minutes - 10 minutes) = 1.2 **Summary**of correct PF&D allowance factors:**For a correct PF&D allowance of 9 minutes an hour**: Multiply the standard time of the worker who does not have a disability by 1.1764705 (may be rounded to 1.1765).**For a correct PF&D allowance of 10 minutes an hour**: Multiply the standard time of the worker who does not have a disability by 1.2.

- Common errors involving allowance factors. Two incorrect figures employers use as allowance factors are 1.1667 and 1.15. The faulty reasoning behind these errors is:
- Since 9 is 15% of 60, multiplying the standard time by 1.15 is mistakenly considered the same as giving a 9 minute allowance.
- Since 10 is 16.67% of 60, multiplying the standard time by 1.1667 is mistakenly considered the same as giving a 10 minute allowance.

- The following example demonstrates how using an
**Allowance percentage**. The INV must also ensure that the "allowance percentages," when used, comply with the requirement for a PF&D allowance. These are also acceptable when done correctly.**For a PF&D allowance of 9 minutes**:

Use 85% (100 less 15%). 85% of 60 minutes is 51 minutes.

Multiplying the number of units produced in 60 minutes by 85% (i.e., giving an "allowance percentage" of 85%) will yield a 9 minute PF&D allowance.**For a PF&D allowance of 10 minutes:**

Use 83.33% (100 less 16.667%). 83.33% of 60 minutes is 50 minutes.

Multiplying the number of units produced in 60 minutes by 83.33% (i.e., giving an "allowance percentage" of 83.33%) will yield a 10 minute PF&D allowance.- The accuracy of using an
**allowance percentage**to provide for PF&D can be demonstrated using the same starting point as the example above: the production standard is 10 seconds per unit and the employer wishes to give an allowance of 9 minutes. In one hour (3,600 seconds), 360 units will be produced. Multiplying 360 by a percentage factor of 85% yields an expected production rate of 306 units per hour. This is the same amount as in the example above when the 1.1764705 allowance factor was used - thus using either the correct allowance factor or the correct allowance percentage will yield the same accurate PF&D. - Use of any percentage allowance greater than 85% results in a PF&D allowance that is less than 15%, and so is not in compliance.

**Simpler alternatives for allowing for an appropriate PF&D**: The following, which have been discussed above, are two easier ways of computing PF&D. If employers have had difficulty with other methods of figuring the allowance, the INV may wish to explain these methods as possible alternatives.- Divide 3060 seconds (51-minute hour) by the standard for workers who do not have disabilities (seconds per unit) and this will allow for a 9 minute PF&D. To allow for a 50-minute hour, divide 3000 seconds by the standard for workers who do not have disabilities.

OR - Simply conduct a 50 or 51 minute time study. Or, conduct a 25-minute time study and multiply by 2 (yields a 50-minute hour). To yield a 51-minute hour, conduct a 25-- minute study and multiply by 2.

- Divide 3060 seconds (51-minute hour) by the standard for workers who do not have disabilities (seconds per unit) and this will allow for a 9 minute PF&D. To allow for a 50-minute hour, divide 3000 seconds by the standard for workers who do not have disabilities.