Another Unfavorable Appellate Court Ruling for Employers-Court Mandates Rest Periods for Commission Only Employees

 

Following on the heels of the California Supreme Court decision in Agustus, et al. v. ABM Security (holding that employers cannot require their employees to remain on-call during legally mandated rest periods) the California Court of Appeal for the Second District issued a decision concerning compensation for rest periods taken by commissioned employees. In Vaquero v. Stoneledge Furniture LLC, B269657 (February 28, 2017), the Court tackled the issue of whether employers are required to separately compensate commissioned employees for rest periods taken during the work day in accordance with the state’s labor laws. 

The Vaquero case involves commissioned employees employed Stoneledge Furniture LLC, parent company for Ashley Furniture HomeStore, who filed a class action for unfair business practices, unpaid rest periods, and unpaid wages upon termination. Commissioned employees at Stoneledge Furniture were paid commission only. However, in situations in which a commissioned employee did not earn enough in commission to be paid a minimum pay wage of $12.01 per hour per pay period, the employer would draw wages from future commissions. 

Under the employer’s compensation plan, commissioned employees were not provided with separate compensation for time that they could not spend earning a commission, such as during rest periods, but also during meetings or training and other non-selling time spent working. 

According to the trial court’s findings, the employer’s pay plan for the commission-based employees guaranteed that the employees were compensated for all of the time that they worked and for their rest periods. The trial court thus dismissed the case. The Court of Appeals disagreed.

According to the Court of Appeals evaluation of the employer’s compensation plan in Vaquero, the time spent for rest periods taken by commission-earning sales associates during the workday was uncompensated time because rest periods are time when commission-based employees cannot earn their commissions. The parties agreed that the state’s labor laws applied to the commissioned employees, and the Court of Appeals reasoned that because the commission-based employees are restricted from earning any commission during their rest breaks, they are being deprived of mandated paid rest periods under California Labor Code Section 226.7. As such, the Court of Appeals found that employers have a duty under the law to provide commission-based employees with separate compensation for rest periods. 

The Court of Appeals held that employers are responsible for accounting for and providing compensation for rest periods separate and apart from the commission-based employee’s commission pay. While the decision is a win for commission-based employees, the decision makes things even more challenging for already burdened California employers.  In addition to changes in accounting practices, employers will now need to provide compensation for commissioned employees’ rest periods as a result of this decision or potentially face costly litigation.