RICARDO Vaquero and Robert Schaefer worked as Sales Associates for Stoneledge Furniture, a retail furniture company. Stoneledge paid sales associates on a commission basis, based on the company’s Commission Compensation Pay Agreement. If a sales associate did not earn “Minimum Pay” of at least $12.01 per hour in commissions in any pay period, Stoneledge paid the associate a “draw” against “future Advanced Commissions.” This meant that the amount of the draw will be deducted from future Advanced Commissions. The employees are assured they will always receive at least $12.01 per hour for every hour worked.
The commission agreement did not say how non-selling time is to be paid. Examples of non-selling time were time spent in meetings, training, and during rest breaks. However, employees recorded their non-selling time by clocking into the employer’s electronic timekeeping system at the start of each shift, clocked out and back in for meal breaks, and clocked out again when their shifts ended. Employees were authorized to take rest breaks of at least 10 minutes for every four hours worked, though they did not clock out for this.
The employer contends that under its compensation plan all the employee’s time was recorded and paid identically and that employees are paid at least $12 per hour even if they make no sales at all. The employer insisted that although it deducted from employees’ paychecks any previously paid draw on commissions, the repayment was not taken if it would result in payment of less than $12.01 per hour for all hours worked in a week.
Vaquero and Schaefer filed a class action complaint alleging that Stoneledge’s commission pay plan did not comply with California law, specifically, that by taking back hourly rates it already paid after employees earn commissions, the employer failed to pay for rest breaks. The case reached the Court of Appeal, which had to answer the following question:
Are employees paid on commission entitled to separate pay for rest breaks if the commission agreement has a “claw back” provision? The appellate court says yes.
The court noted that the employer’s formula for computing commissions did not address how employees are to be paid for rest breaks (which is time spent not earning commissions). Commissions were computed by multiplying the employee’s weekly delivered sales with the agreed commission rate and the employer paid the resulting amount if it was more than guaranteed minimum contractual rate. When employees’ commissions did not exceed their weekly minimum rate, the employer deducted from future paid commissions (“claw back”) the wages advanced to employees to pay for their hours worked, including rest breaks. Such a system of payment results in employees not being paid for non-productive (or non-selling) time – a practice which courts have found illegal.
The court concluded that “the advances or draws against future commissions were not compensation for rest periods because they were not compensation at all. At best they were interest-free loans… To the contrary, taking back money paid to the employee effectively reduces either rest period compensation or the contractual commission rate, both of which violate California law.”
In other words, when the employer paid an employee on an hourly basis, which included their rest breaks, the company took back that compensation in later pay periods when the employee supposedly earned a commission. Since the commission computation did not account for rest breaks, the employee should have been separately paid for rest breaks.
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C. Joe Sayas, Jr., Esq. is an experienced trial attorney who has successfully obtained significant recoveries for thousands of employees and consumers. He is named Top Labor & Employment Attorney in California by the Daily Journal, consistently Aselected as Super Lawyer by the Los Angeles Magazine, and is a member of the Million Dollar-Advocates Forum.