Rest periods commissioned employees

Rest period pay for commissioned employees?

The Second District Court of Appeal recently decided two questions regarding rest periods and commissioned employees. In Vaquero v. Stoneledge Furniture, LLC (Feb. 28, 2017, No. B269657) ___Cal.App.4th___ [2017 Cal. App. LEXIS 165], the issues were (1) whether employees paid on commission are entitled to separate compensation for rest periods, and (2) whether employers who keep track of hours worked, including rest periods, violate the law by paying employees a guaranteed minimum hourly rate as an advance on commissions earned in later pay periods.

In this case, Mr. Vaquero worked as a Sales Associate for Stoneledge Furniture, a retail furniture company. He served as a lead plaintiff in a class action lawsuit against Stoneledge alleging violations of California’s rest period law.

Stoneledge paid Sales Associates on a commission basis. According to its commission agreement, if a Sales Associate did not earn the equivalent of at least $12.01 per hour in commissions, Stoneledge paid the associate a “draw” against future commissions. The agreement did not provide for compensation for rest periods. Stoneledge allowed its Sales Associates to take rest periods, and claimed that it paid them for rest periods at the same rate as other compensated time.

The trial court found that Stoneledge’s payment system accounted for all hours worked and guaranteed that Sales Associates would be paid more than $12 an hour for those hours. It dismissed the case after concluding that there was no possibility that the employees’ rest period time would not be captured in the total amount paid each pay period.

On appeal, the appellate court began with a review of the rest period law. Employers must permit 10-minute periods during which its non-exempt employees, who work at least 3.5 hour shifts, are not required to work. Employers must pay their employees for the rest periods.

The court of appeal then addressed the first question: whether California law required Stoneledge to separately compensate its Sales Associates for rest periods. A Wage Order requires employers to count “rest period time” as “hours worked for which there shall be no deduction from wages.” A previous decision concerning employees paid by the job or unit (piece-work) established a rule of separate compensation for rest periods where the employer uses an “activity based compensation system” that does not directly compensate for rest periods. The employer could not comply with the law by purportedly negotiating a higher piece rate. The Second District concluded that the Wage Order applies equally to commissioned employees, employees paid by piece rate, or any other compensation system that does not provide compensation for rest breaks and other nonproductive time.

Next, the appellate court considered the second question: whether Stoneledge’s commission plan complied with California law by “counting as hours worked” the time Sales Associates spent taking rest breaks. Although Stoneledge kept track of hours worked and rest periods and treated both identically, the formula it used for determining commissions did not include any component that directly compensated Sales Associates for rest periods. When Stoneledge paid an employee only a commission, the commission agreement did not compensate for rest periods. And for Sales Associates who did not earn the minimum rate in commissions, the compensation was hourly pay along with a “draw” (advance) against future commissions. In that case, there was no compensation for rest periods because Stoneledge took it back in later pay periods.

The Second District reversed the trial court’s dismissal of the case.

Posted by deanroyerlaw