California: Commissioned Employees Must be Specifically Paid for Rest Breaks

In Vaquero v. Stoneledge Furniture LLC, commissioned sales staff were guaranteed a $12.01/hour wage as a draw against their sales commissions.  If the employee’s commissions exceeded the $12.01/hour minimum, the employee would be paid the actual amount they earned.  If not, the employee would be compensated enough to meet the $12.01/hour rate, and the extra would be later recouped from future commissions.  However, the commission plan did not ensure that sales staff would be specifically compensated for any “non-selling time,” which included rest periods.

The California Court of Appeal stated that because the guaranteed minimum hourly rate acted as a draw against future commissions, the minimum hourly guarantee was a “loan” rather than appropriate compensation.  Additionally, people who were paid commission received the same amount of compensation regardless of whether they took rest breaks.  Stoneledge’s pay practices effectively averaged out pay just to meet the minimum wage law, rather than appropriately compensating employees for the rest periods at their set minimum or contractual hourly rate.  The appellate court reasoned that because the non-selling time was not specifically considered for compensation under the activity-based commission plan, Stoneledge must compensate employees separately for the non-selling time included in paid rest periods.

Employers should take care to structure inside sales commission agreements to properly account for all time worked, including rest periods.

Action Items

1. Have commission pay structures and payroll practices reviewed to ensure that all employees are appropriately compensated for paid rest breaks.
2. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

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