MELISSA Fong and other hair stylists worked for Regis Corporation, which operates several hair salons all over California. During their employment, the stylists were paid on a “commission” or piece-rate basis for performing hair styling services. According to the employer’s policy, stylists were paid 50% of the sales price of each styling service performed on a client, and 10% of the sales price of products that stylists sold to clients.
However, the stylists also performed several non-stylist related duties for which they were not paid. These duties included cleaning the salon, organizing product displays, doing laundry, folding towels, wiping down shelves, answering customer telephone calls, setting customer appointments, greeting customers, and cleaning the bathroom. The stylists were required to perform these non-styling duties each shift they worked. Stylists also spent unpaid time waiting for customers while continuing to be under the control of the employer.
Because they were paid on a commission or piece-rate basis only and only for performing styling services and selling salon product, the stylists were not paid for hours spent performing non piece-rate compensable duties.
The employer also had a policy that provided hair stylists with incentive bonuses in the form of points which stylists could redeem for cash, VISA cards, styling tools, and other benefits. The bonus is provided when quotas set by the employer are met. The bonus points, according to the employer, is equivalent to $.005 in cash value. However, the company does not include this bonus in computing a stylist’s overtime pay. More importantly, the company policy is that the earned points are automatically deleted from the company’s system upon the termination of an employee. Because incentive bonuses are considered wages, the terminated employees are not paid all their wages due upon termination, as required by law.
Added to this list of good intent that fails to result in lawful compliance, the employer allows its employees to earn a one-week of paid vacation after 1 year of service, a two-week paid vacation after 3 years of service, and a three-week paid vacation after 10 years of service. However, the employer specifically told its employees that unused vacation may not be accumulated and must be taken within the appropriate employment year, implying a “use it or lose it” provision. Thus, terminated employees were not paid all accrued an unused vacation wages upon separation of employment.
The employees sued their former employer, claiming that Regis failed to pay them and other employees, minimum and overtime wages for all hours worked, for missed meal and rest periods premiums, for earned but unused vacation wages, and for unpaid overtime wages that resulted from the employer’s incorrect calculation of all earned overtime wages. The employer denied all of the employees’ claims.
Employers may legally pay employees on a commission or piece-rate basis instead of an hourly rate. However, employees must be paid at least the minimum wage for all hours worked. If employees spend time doing other work-related activity, such as pick-up or clean-up activities, attending compulsory work meetings, travelling under employer’s control, or being required to wait, these are considered hours worked. Hence, these “hours worked” must be paid at least at the minimum wage (or an agreed hourly rate) for that period. Additionally, if these piece rate or a commission employees become entitled to incentive bonuses, the basis of their overtime pay becomes higher.
As for their vacation pay, California law prohibits employers from forfeiting accrued and earned vacation. Vacation pay is considered wages and must be paid upon termination. Thus, any “use it or lose it” provision is illegal and entitles the employee to back wages.
Rather than continue litigating the case, the parties decided to settle and the employer agreed to pay the employees $5,750,000. Any unclaimed funds will be divided among class members.
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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 selected as Super Lawyer by the Los Angeles Magazine, and is a member of the Million Dollar-Advocates Forum.