Wage and Hour Case Notes

• Jurisdiction: California,United States,Federal
• Author: By Lois M. Kosch
• Publication year: 2017
• Citation: Vol. 31 No. 3

Wage and Hour Case Notes

By Lois M. Kosch

Lois M. Kosch is a partner at Wilson Turner Kosmo. She specializes in counseling and representing employers in all aspects of employment law and litigation. Ms. Kosch is a former member of the Labor and Employment Law Section's Executive Committee.

Employees Paid Commission Entitled to Separate Compensation for Rest Periods

Vaquero v. Stoneledge Furniture LLC, 9 Cal. App. 5th 98 (2017)

In a case of first impression, the court of appeal held that employees who are paid commission are entitled to separate compensation for state-law-mandated rest periods, and employers who track hours worked violate this requirement by paying employees a guaranteed minimum hourly rate as an advance on commissions earned in later pay periods.

Plaintiffs, former employees of a retail furniture company, filed a class action alleging the employer's commission pay plan did not comply with California law. The plan at issue paid sales associates on a commission basis, but if a sales associate failed to earn "minimum pay" of at least $12.01 per hour in commissions in any pay period, the employer paid the associate a "draw" against future commissions so employees always received at least $12.01 per hour for every hour worked. The commission plan did not provide any separate compensation for non-selling time such as meetings and rest periods. While associates clocked in and out using a timeclock, they did not clock out for rest breaks. The trial court granted the employer's motion for summary judgment, finding the pay plan captured the rest break time in the total amount paid each pay period, and thus the employer was not required to pay its commissioned employees separately for rest periods.

The court of appeal reversed. The court looked to Labor Code § 226.7 and Wage Order No. 7, both of which require meal and rest breaks. Subdivision 4 of Wage Order No. 7 requires employers to pay employees the minimum wage for all hours worked and applies equally to commissioned employees, employees paid by piece rate, or any other compensation system that does not separately account for rest breaks and other nonproductive time. Because rest periods are on the clock, they are considered "hours worked." The commission agreement at issue did not allow employees to earn wages during rest periods. While the employer treated break time the same as other work time, its commission formula did not include any component that directly compensated its sales associates for...