Vaquero v. Stoneledge Furniture, 2/28/17, 2DCA/7
This is a wage and hour class action that concerns whether a traditional commission pay plan compensates employees for their rest breaks. Two fundamental provisions of California labor law: 1) All hours worked by the employee must be paid, and 2) the 10-minute rest periods mandated by California law are counted as hours worked and must be paid as such. Here, company compensated its furniture sales associates under a straight commission plan, where commissions were based on the amount of furniture sold multiplied by the commission rate. In compliance with other labor laws, sales associates recorded the time they worked, including rest time, even though wages were not paid by the hour. Sometimes commissions divided by hours worked equaled at least $12/hour; but when commissions fell below that, the company paid the employee a draw to bring wages up to the $12/hour level. Company would then deduct these draws from future commissions earned. But again, no part of the company’s compensation plan accounted for rest breaks. The trial court granted summary judgment in favor of company. Held: Reversed.
In addition to the plain language of Wage Order 7 (the Wage Order governing the mercantile industry in California), the court relied to Bluford v. Safeway Stores, Inc. (2013) 216 Cal.App.4th 864. In Bluford, the court interpreted Wage Order 7 to require employers to “separately compensate[ ]” employees for rest periods where the employer uses an “activity based compensation system” that does not directly compensate for rest periods. In Bluford, grocery drivers were paid based on miles driven the time the trips were made and the locations where the trips began and ended. No part of the compensation plan in Bluford provided for payment for rest breaks. Relying on this authority, the court in this case held that Wage Order No. 7, required Stoneledge to separately compensate its sales associates for rest periods.
Two key takeaways — First, employers should look at their compensation plans closely to make sure the pay plan compensates for rest breaks. Second, the fact that the total commissions paid divided by hours worked equal at least the minimum hourly wage does not mean that rest periods are being paid for. Still, conceptually you can see where the defendant and the trial court who found in favor of the company were coming from — If total commissions can be divided by hours worked to ensure that the hourly minimum wage requirements are being met, why can’t the same exercise be done to determine whether rest breaks are also being paid? The contrary answer arrived at by the appellate court probably lies in the fact that wage and hour laws are interpreted to maximize employee protection.
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