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.
No Rest for Employers
Augustus v. ABM Security, 12/22/16, Cal SC
The California Supreme Court has upheld the trial court’s $90 million summary judgment in favor of the security guards against their employer, ABM, over its rest break policy. ABM had an explicit policy that required its security guards to be on-call during their 10-minute rest breaks, and required the security guards to carry pagers or radios in case there was an emergency. The primary issue before the Court was whether an employer satisfies its obligation to relieve employees from duties and employer control during rest periods when the employer nonetheless requires its employees to remain on-call. The Court answered, No — An employee who is on-call during a rest break has not received a proper rest break and is entitled to an additional hour’s wage under Labor Code section 226.7.
Incredibly, this rule applies even if the on-call employee in fact took an uninterrupted rest break and regardless of whether the on-call policy actually interfered with any of the guards’ ability to take their rest breaks. As the dissent points out, the evidence offered by ABM at the trial level tended to show that the policy did not interfere with the guards ability to take interrupted breaks, and there was no even evidence of guards being called off their breaks. If that is the case, it is difficult to understand how the majority concluded that the employer’s policy prevented employees from taking short walks or pumping breast milk. My favorite quote from the case is by the dissent: “In a marked departure from the approach we have taken in prior cases
concerning whether on-call time counts as work, and in sharp contrast to the
DLSE‘s views about what constitutes a duty-free break, the majority in this case
appears to conclude that a requirement to remain reachable by pager, phone, or
other portable communications device, without more, is inherently incompatible
with the requirement to provide a duty-free rest period — even if the pager never
sounds or the phone never rings.” I added the emphasis.
And so this case has broad application and creates risks far beyond employers who explicitly require their employers to remain on-call during their rest breaks. The key fact in the case was that guards were required to carry pagers or radios during their rest breaks, and were also required to respond to incidents during their rest breaks. Many employers have practices that in fact amount to the same thing. I am sure that future cases will attempt to apply this new rule to employers whose employees are simply required to keep their pagers or radios with them during their rest breaks.