Wage and Hour Update

• Publication year: 2014
• Author: By Lois M. Kosch

Wage and Hour Update

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.

California Supreme Court Holds Employers Cannot Reassign Commissions Paid in One Pay Period to Other Pay Periods to Satisfy Minimum Earnings Requirements for Inside Sales Exemption

Peabody v. Time Warner Cable, Inc., 59 Cal. 4th 662 (2014)

Plaintiff, a commissioned salesperson, sued for various wage and hour violations, including failure to pay overtime and the applicable minimum wage. The defendant employer paid her $9.61 per hour biweekly and commission wages every other pay period. The employee often worked more than forty-five hours per week and alleged she was not paid the appropriate minimum wage and/or overtime. The employer contended the employee was exempt from overtime pay under the "commissioned employee" exemption, which requires that an employee's "earnings exceed one and one-half (1½) times the minimum wage." Cal. Code Regs., tit. 8, § 11040, subd. 3(D). The employer also claimed it satisfied the minimum earnings and minimum wage requirements by allocating commissions from the periods in which they were paid to the pay periods in which plaintiff earned them.

The employer removed the case to federal court and successfully moved for summary judgment. The employee appealed. Finding no clear controlling authority on the issue of whether the employer could allocate commissions from a different pay period to satisfy the minimum earnings prong, the U.S. Court of Appeals for the Ninth Circuit asked the California Supreme Court for guidance. In a unanimous decision, the supreme court held that an employer may not attribute commission wages paid in one pay period to other pay periods in order to satisfy California's compensation requirements. The court held that employers satisfy the minimum earnings requirement of the commission exemption only in those pay periods in which the employer actually pays the required minimum wage. Thus, employers "may not attribute wages paid in one pay period to a prior pay period to cure a shortfall." The court noted that this interpretation is consistent with the purpose of the minimum earnings requirement, as it requires employers to actually pay the minimum amount in each pay period to mitigate the burden imposed by exempting employees from receiving overtime.

FedEx Delivery Drivers Are Employees, Not Independent Contractors, Under California's Right to Control Test

Alexander v. FedEx Ground Package Sys., Inc., 2014 U.S. App. LEXIS 16585 (9th Cir., Aug. 27, 2014, Nos. 12-17458, 12-17509)

In a certified class action, FedEx drivers claimed they were improperly classified as independent contractors and sought damages for unpaid wages, reimbursement for business expenses, and associated penalties. The district court entered summary judgment in favor of FedEx, finding FedEx properly treated the drivers as independent contractors in light of the entrepreneurial...