Rest Periods Must be Separately Compensated for Commissioned Employees

by Hunter Pyle on Apr. 28, 2017

Employment 

Summary: Rest Periods Must be Separately Compensated for Commissioned Employees

In Vaquero v. Stoneledge Furniture LLC (Feb. 28, 2017, B269657) __ Cal.App.4th __ (“Slip Op.”), the Court of Appeal explained that an employer’s obligation to separately compensate employees for rest periods extends to employees who are paid on a commission basis. This decision is in accord with other Court of Appeal decisions that require employers to separately compensate rest periods for employees who are paid on a piece-rate basis. (See Bluford v. Safeway Stores, Inc. (2013) 216 Cal.App.4th 864; Gonzalez v. Downtown L.A. Motors, LP (2013) 215 Cal.App.4th 36; see also Labor Code § 226.2.)

In Vaquero, the court analyzed IWC Wage Order No. 7, which applies to the Mercantile Industry, including retail and wholesale salespeople. Section 12 of Wage Order No. 7 says that employees must receive 10 minutes of rest time for every four hours worked, or major fraction thereof, which must be counted as hours worked for which there shall be no deduction from wages.

Stoneledge runs retail furniture stores in California called Ashley Furniture HomeStores. The sales associates who work in those stores are paid based on the company’s Sales Associate Commission Compensation Pay Agreement. Stoneledge tracked the hours that sales associates worked. If they did not earn at least $12.01 per hour in commissions then Stoneledge paid the sales associates a “draw” against future commissions to bring their pay up to $12.01 per hour. The compensation agreement did not provide separate compensation for any non-selling activities, including rest periods.  Sales associates did not clock out for rest periods and they were given an opportunity to take 10 minute rest periods for every four hours worked.

Stoneledge argued that sales associates were paid for their rest periods, because their rest period time was compensated in the same way as all other work time. Importantly for this case, however, Stoneledge deducted any previously paid draw on commissions from sales associates’ pay when their weekly pay exceeded $12 per hour.

The court first looked to the Wage Order and other cases discussing an employer’s obligations to authorize and permit paid rest periods. It recognized that California’s wage and hour laws are meant to be “liberally construed in favor of protecting workers.” (Slip Op. at p. 10, quoting Gonzalez, 215 Cal.App.4th at p. 44 and Augustus v. ABM Security Services, Inc. (2016) 2 Cal.5th 257, 262 [“we liberally construe the Labor Code and wage orders to favor protection of employees”].) In light of that, the court went on to disagree with the lower court’s decision on summary judgment that Wage Order No. 7 did not require Stoneledge to pay its commissioned employees separately for their rest periods.

In doing so the court agreed with Bluford and Gonzalez, both of which held that employers’ must “separately compensate employees for rest periods if an employer’s compensation plan does not already include a minimum hourly wage for such time.” (Slip Op. at p. 14.) However, other cases have not addressed whether the requirement to separately compensate employees for rest periods applies to commissioned employees. The Vaquero court held that “Wage Order No. 7 applies equally to commissioned employees, employees paid by piece rate, or any other compensation system that does not separately account for rest breaks and other nonproductive time.” (Slip Op. at p. 15.) This is because “nothing about commission compensation plans justifies treating commissioned employees differently from other employees.” (Ibid.)

Stoneledge’s commission agreement was “analytically indistinguishable from a piece-rate system in that neither allows employees to earn wages during rest periods.” (Slip Op. at p. 16.) Such compensation plans undermine the protective policy underlying the wage orders by discouraging employees from taking rest breaks.

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