Commission-based employees entitled to separate rest period pay, court rules

By Glenn Minnis | Mar 13, 2017

LOS ANGELES — A California appeals court has found that nonexempt workers paid on commission must also be paid separately for all legally required break periods.

In Vaquero v. Stoneledge Furniture LLC, the 2nd District Court of Appeal confirmed that all such employees are entitled to “enhanced compensation and recovery periods.”  

The ruling puts commissioned workers across the state on the same plane as “piece-rate” employees.

The National Law Review reports that early last year California also passed a law that requires employers to compensate piece-rate employees for all rest, recovery and non-productive periods at rates dictated by the statute.

In rendering its verdict, the court said that the Department of Labor Standards Enforcement doesn’t see any reason why commissioned and piece-rate workers should be treated any differently and as such should be entitled to the same paid 10-minute rest periods.

Although some are already speculating that the new rulings may force some companies into readjusting pay practices that have included averaging unproductive time with commissions paid for productive time to satisfy minimum wage requirements, local employment attorney John K. Skousen told the California Record all the hysteria might not be warranted.

“It’s an easy problem to fix because you always know how many minutes are required to be paid,” Skousen, a partner with Fisher Phillips, said. “Every day, you just calculate the time and keep track of it.”

In arriving at their conclusion, the court wholly rejected defendant arguments that said commission-paid employees were not similarly situated with piece-rate employees.

Although the verdict did not directly involve automobile dealerships, the impact felt there could also be stinging given that many workers in the industry are at least partially compensated on a commission basis.

“The biggest problem with all this is the fear it’s causing,” Skousen said. “It may cause some companies to go too far and do more than what the law requires. You have to be practical, and that means educating supervisors in auto dealerships and from there everyone has to follow instructions.”

Even with that, Skousen admits there could be fallout.

“You might see some increased litigation stemming from this,” he said. “But it will mostly be based on past transgressions some companies might have to deal with. If California wants to keep employees in the state, everyone will need to be reasonable about this.”

In the Vaquero case, the commission agreement in place also failed to compensate salespeople separately for any non-selling time, including time spent in meetings or engaging in certain forms of training. In reaching its verdict, the appellate court overruled an earlier trial court verdict that found the commission agreement adequately compensated workers for all the hours they worked.  

As part of its decision, the higher court stipulated that the time spent on rest periods was, “in effect, deducted unlawfully because it was unpaid time regardless of how much money was earned for commissions.”

According to the ruling, “nothing about commission compensation” justifies their lesser treatment compared to that received by other workers.

In the end, Skousen concedes there may be no one-size fits all solution to dealing with the issue.

“Theoretically, it’s easy, but from a practical standpoint there will need to greater training, greater vigilance and much greater attention to detail," he said.

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