Vaquero v. Stoneledge: Employers Must Separately Compensate CA Commissioned Employees for Rest Periods

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In Vaquero v. Stoneledge Furniture LLC, No. B269657, 2017 WL 770635 (Cal. Ct. App. Feb. 28, 2017) (slip op. available here), the California Court of Appeal, Second Appellate District, reaffirmed that employees paid on commission are entitled to separate compensation for rest periods mandated by state law. In Vaquero, a retail furniture company paid its sales associates exclusively on a commission basis. If the sales associates did not earn at least $12.01 an hour in commissions during any given pay period, the employer would make up the difference with a “draw” against future commissions. (Stoneledge is also known as “Ashley Furniture HomeStore” in California.) Two Ashley Furniture commissioned sales associates filed a class action lawsuit to recover separate pay for rest periods as required by California law, alleging that the employer failed to provide paid rest periods because the employer’s agreement did not provide separate compensation for time when they were not performing sales duties, such as during meetings, rest periods, or participating in training.

The trial court certified the plaintiffs’ claims for unpaid rest periods, unpaid wages upon termination, and unfair business practices for California sales associates, but subsequently granted Stoneledge’s motion for summary judgment, finding that the employer’s commission plan guaranteed that sales associates were paid for all time worked, including their rest periods. The employer argued that, under the commission agreement, sales associates were guaranteed to be paid $12.01 per hour, including their rest periods; thus, “all time during rest periods was recorded and paid as time worked identically with all other work time.” Slip op. at 3. The trial court agreed, and held that under the agreement, “there was no possibility that the employees’ rest period time would not be captured in the total amount paid each pay period” because the employer tracked all hours the sales associates worked, including rest periods. Id. at 5.

The California Court of Appeal reversed. The California Court of Appeal determined that this commission plan violated California Wage Order No. 7, which “requires employers to count ‘rest period time’ as hours worked for which there shall be no deduction from wages.” Slip op. at 11. Because Stoneledge’s commission plan did not separately compensate the sales associates for the time they worked during which they could not earn commissions, it did not “separately account and pay for rest periods to comply with California law.” Id. at 25. Indeed, the “advances or draws against future commissions were not compensation for rest periods because they were not compensation at all. At best[,] they were interest-free loans.” Id. at 23. “[T]aking back money paid to the employee effectively reduces either rest period compensation or the contractual commission rate, both of which violate California law.” Id.

The Vaquero decision establishes that California employers using incentive-based pay systems must compensate those employees separately for time when they were not performing sales duties, such as during rest breaks. Moreover, employers may need to modify wage statements provided to employees to comply with California Labor Code section 226(a) to account for both the commissioned pay and the hourly pay during rest periods.

Authored By:
Bevin Allen Pike, Senior Counsel