Make sure your commission and piece-rate employees get to rest up… And get paid to do it!

In early 2017, a California Court of Appeal ruled that commissioned employees must receive separate compensation for rest periods.  On March 20, 2017, the court modified its decision to clarify that it did not intend to create a rest period claim for nonexempt, salaried employees who are not paid separately for rest periods.  This was a welcome change for California employers, negating rest period claims that might be brought by employees whose salaries falls below the minimum threshold or whose “exempt” duties fall short of the 51% mark.

Vaquero v. Stoneledge Furniture, LLC involved a claim by sales associates who were paid on a commission basis.  The commission plan guaranteed a minimum of $12.01 per hour and specified that, in the event an employee failed to meet that minimum, the employer would allow a draw against future commissions to bring the employee up to no less than $12.01 for each hour worked.  The commission agreement did not provide any separate payment for rest period time.

Although the trial court ruled for in favor of the employer, the court of appeal reversed.  The Court of Appeal held that the IWC Wage Orders require the employer to separately compensate sales associates for rest period time in cases when they are not already earning an hourly wage.  The Court further held that this requirement applies to commission employees, as well as to piece-rate workers.

In light of this decision, California employers should revisit their commission payment plans in order to ensure that employees are properly compensated.  Employers are reminded that commission agreements must be in writing, signed by the parties, and must clarify the key terms of the commission plan, including how commissions are calculated, when they are earned, and when they are paid.