A California Court of Appeal has ruled that non-exempt commissioned employees must be paid separately and specifically for rest breaks and non-productive time. In Vaquero, et al. v. Stoneledge Furniture LLC, (Filed Feb. 28, 2017) Case No. BC522676, the Second Appellate District ruled that, at least under Wage Order 7-2001, applicable to the mercantile industry, employers must separately compensate non-exempt commissioned Employees for rest breaks and non-productive time. The United States Department of Labor Wage and Hour Division exempts employees who are paid commissions from being paid overtime only if the employee is employed by a retail or service establishment; and receives 1.5 times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked; and more than half the employee’s earning in a representative period consist of commissions. If all of these criteria are not met, then the commissioned employee is non-exempt.
The Plaintiffs in Vaquero were retail sales associates for a retail furniture company who filed a wage and hour class action for failure to provide rest periods in violation of California law and Wage Orders. The Court found that the employment agreements did not directly compensate the sales associates for meetings and rest breaks, and the employer did not account for them so the rate of pay applicable to each meeting and break could not be ascertained. Thus, it determined the employer had violated the Labor Code and applicable Wage Orders.
The Court did not address how to calculate the rate at which rest breaks must be paid to employees paid on a draw plus commission. Some idea of how the Court would address the manner of calculation can be found in Labor Code section 226.2 applicable to employees compensated by a piece-rate Section 226.2 requires employers to separately compensate piece-rate employees for rest, recovery and other nonproductive time at a regular hourly rate “no less than the higher of”: (1) the “average hourly rate”; or (2) the applicable minimum wage.
If you employ non-exempt commissioned workers we suggest that you consult with your legal counsel to be sure you are in compliance with these Labor and Wage laws so that you can make every effort to avoid having to appear before the Labor Board.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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