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California Supreme Court Unanimously Holds Employers May Not Attribute Commissions Paid in One Period to Other Periods to Satisfy Commissioned Sales Exemption

In Commission Sales Exemption, Commissions on July 14, 2014 at 11:13 am

This morning, the California Supreme Court issued its opinion in Peabody v. Time Warner Cable, Inc., Case No. S204804, __ Cal. 4th __ (July 14, 2014).  At the request of the Ninth Circuit, the Court considered whether an employer may attribute commission wages paid in one pay period to other pay periods in order to satisfy California’s compensation requirements.  The court unanimously concluded no:

[A]n employer satisfies the minimum earnings prong of the commissioned employee exemption only in those pay periods in which it actually pays the required minimum earnings. An employer may not satisfy the prong by reassigning wages from a different pay period.

Id. at *9.  The Court cited the narrow construction of exemptions against the employer and the purpose of the minimum earnings requirement:

Whether the minimum earnings prong is satisfied depends on the amount of wages actually paid in a pay period. An employer may not attribute wages paid in one pay period to a prior pay period to cure a shortfall. This interpretation narrowly construes the exemption’s language against the employer with an eye toward protecting employees. (Ramirez v. Yosemite Water Co., supra, 20 Cal.4th at pp. 794-795.) It is also consistent with the purpose of the minimum earnings requirement. Making employers actually pay the required minimum amount of wages in each pay period mitigates the burden imposed by exempting employees from receiving overtime. This purpose would be defeated if an employer could simply pay the minimum wage for all work performed, including excess labor, and then reassign commission wages paid weeks or months later in order to satisfy the exemption‟s minimum earnings prong.

Id. at *7.  The Court also cautioned against conflated federal and state labor law in this area: Although it is true that the commissioned employee exemption has a federal counterpart in 29 U.S.C. section 207(i), “[w]e have previously cautioned against ‘confounding federal and state labor law’ . . .  ‘ . . . where the language or intent of state and federal labor laws substantially differ.’ ” (Martinez v. Combs, supra, 49 Cal.4th at p. 68.) Unlike state law, federal law does not require an employee to be paid semimonthly. (Olson v. Superior Pontiac- GMC, Inc. (11th Cir. 1985) 765 F.2d 1570, 1574-1575.) It also permits employers to defer paying earned commissions so long as the employee is paid the minimum wage in each pay period. (Id. at pp. 1578-1579.) In light of these substantial differences from California law, reliance on federal authorities to construe state regulations would be misplaced. Id. at *9.

By CHARLES H. JUNG

Compensation Based Solely Upon Hours, With No Guaranteed Minimum, Is Not a Salary

In Exemptions, Salary on May 18, 2013 at 3:16 am
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On Thursday, the Sixth District held that a compensation system based solely on the number of hours worked, with no guaranteed minimum cannot be considered a salary, and therefore cannot serve as the basis for an exempt classification.  Negri v. Koning & Associates, No. H037804, __ Cal. App. 4th __ (6th Dist. May 16, 2013).  California Labor Code § 515(a) requires that to be exempt, the employee must earn a “monthly salary equivalent to no less than two times the state minimum wage for full-time employment.”

Plaintiff is an insurance claims adjuster who was paid $29 per hour with no minimum guarantee.  Slip Op. at 1.  When he worked more than 40 hours in a week, he was still paid at $29 per hour.  He brought a claim for overtime pay, and the trial court issued a defense verdict, concluding that plaintiff was an exempt employee.  Id. at 3.

Defendant argued that plaintiff was properly classified as exempt because plaintiff’s workload was not subject to reduction or variation, and he worked substantially the same number of hours each week of his employment.  In other words, defendant argued that even though it paid plaintiff by the hour, because there was always enough work to occupy him for 60 hours per week, the resulting compensation was a salary because it did not vary.  Defendant further maintained that “some sort of reduction in workload” must actually occur in order for an employee to lose his exemption.

The Court of Appeal disagreed, even though plaintiff always received an unvarying minimum amount of pay in practice:

We recognize that, in practice, defendant always paid plaintiff the equivalent $29 per hour for 40 hours per week so that he, in effect, received an unvarying minimum amount of pay. We also recognize that, as a general matter, an exempt employee may be paid extra for extra work without losing the exemption. (See Kennedy, supra, 410 F.3d at p. 371.) The problem here is that defendant stipulated to the fact that it “never paid [plaintiff] a guaranteed salary”; if he worked fewer claims “he made less money than if he worked more claims.” That is the same thing as saying that plaintiff was not paid “a predetermined amount” that “was not subject to reduction based upon the quantity of work performed.” He was not paid a salary. For that reason, defendant did not prove that the administrative exemption of Wage Order 4 applies in this case.

Slip Op. at 8-9.

Judges & Attorneys

Associate Justice Eugene M. Premo delivered the opinion for the Court, with Presiding Justice Conrad L. Rushing and Associate Justice Franklin D. Elia concurring.

Appeal from judge of the Santa Clara County Superior Court, Hon. Socrates P. Manoukian.

Counsel for Plaintiff/Appellant: Ari Moss, Dennis F. Moss

Counsel for Defendant/Respondent: Michael A. Bishop, N. Kate Jeffries.

By CHARLES H. JUNG

First District Holds That Unlicensed Law School Graduate Still May Be Exempt Under Learned Professions Exemption

In Exemptions, Professional on August 26, 2011 at 5:09 pm
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The First District Court of Appeal held that summary judgment was properly granted in a wage and hour case because plaintiff unlicensed law school graduate performed duties that brought him within the exemption for learned professionals.  Zelasko-Barrett v. Brayton-Purcell, LLP, — Cal.Rptr.3d —-, 2011 WL 3594015, No. A130540 (1st Dist. Aug. 17, 2011) .

Background

Plaintiff was employed by the Brayton-Purcell, LLP (Brayton) law firm as a Law Clerk II after he graduated from law school but before he passed the bar examination. Id. *1. After being admitted to the bar, plaintiff was designated as an associate attorney, and performed tasks customarily performed by junior attorneys. Id. He drafted pleadings, discover demands and responses, did legal research and drafted memoranda of points and authorities, interviewed witnesses, etc. Id. The trial court granted Brayton’s motion for summary judgment and sustained objections to numerous statements where plaintiff denied he was employed in a professional capacity and performed work covered by the professional exemption. Id. Read the rest of this entry »

Northern District Finds Factual Determination of Outside Salesperson Exemption Unsuited for Class Treatment

In Certification, Class Notice, Collective Action, FLSA, Opt-in, Outside Salesperson, Overtime, Uncategorized on October 8, 2010 at 5:37 am
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The Northern District of California granted defendant’s motion to decertify a conditional FLSA class in Wong v. HSBC Mortgage Corporation (USA), No. C-07-2446 MMC, 2010 WL 3833952 (N.D. Cal. Sept. 29, 2010).  Plaintiff HSBC loan officers, allege that HSBC improperly classified them as exempt under the Federal Labor Standards Act (“FLSA”), and, consequently, violated the FLSA by failing to pay them overtime compensation. Id. *1. The Court granted plaintiffs’ motion for an order conditionally certifying, for purposes of the FLSA, a class of persons who, as of May 7, 2004, had been employed by HSBC as loan officers within the United States. Id. Notice of the action was sent to the class, and 120 class members filed consent forms, joining the action as plaintiffs.  Id.

Decertification Motion

HSBC argued that individualized factual determinations will be necessary regarding HSBC’s affirmative defense that plaintiffs are/were properly classified as “outside” salespersons and, consequently, are exempt under the FLSA. Id. *2 (citing 29 U.S.C. § 213(a)(1) (providing “maximum hour requirements” in FLSA do not apply to “any employee employed … in the capacity of outside salesman”)). Read the rest of this entry »

Ninth Circuit Holds That Newspaper Reporters Not Exempt

In 23(b)(2) Class, Class Actions, Class Notice, Collective Action, Exemptions, FLSA, Jury, Meal and Rest Breaks, Opt-in, Opt-out, Overtime, Preemption, Professional, Trial, Unfair Competition Law on September 30, 2010 at 12:14 am
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On Monday, the U.S. Court of Appeals for the Ninth Circuit affirmed in “all respects” the trial court’s grant of partial summary judgment to plaintiffs, a judgment after jury and bench trials, and an award of attorney’s fees to plaintiffs.  Wang v. Chinese Daily News, Inc., Nos. 08-55483, 08-56740, — F.3d —-, 2010 WL 3733568 (9th Cir. Sept. 27, 2010).  Among other things, the Ninth Circuit held that plaintiff newspaper reporters were non-exempt.  (Thank you to Randy Renick for bringing this case to my attention.)

Background

Employees of Chinese Daily News, Inc. (“CDN”), a Chinese-language newspaper, filed suit against CDN on behalf of current, former, and future CDN employees based in CDN’s San Francisco and Monterey Park (Los Angeles), California locations.  Id. *1.  Plaintiffs claimed violations of the FLSA, California’s Labor Code, and California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, alleging that employees were made to work in excess of eight hours per day and forty hours per week. Id. Read the rest of this entry »

After Bench Trial on UCL Claim, Northern District Finds “On-Job Supervisor” Properly Classified as Exempt Under Administrative Exemption

In Administrative, Exemptions on September 23, 2010 at 10:20 pm
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District Judge Susan Illston of the Northern District of California conducted a bench trial of plaintiff’s overtime claim under the Unfair Competition Law (“UCL”) and found that defendant UPS met its burden of proving that plaintiff was properly classified as falling within the administrative exemption in his role as “On-Job Supervisor”.  Lopez v. United Parcel Service, Inc., C 08-05396 SI, 2010 WL 3630619 (N.D. Cal. Sept. 14, 2010).

Background

Plaintiff Ben Lopez sued defendant United Parcel Service, Inc. (“UPS”) contending that UPS improperly classified him as an employee exempt from overtime compensation under California law. Id. *1. Read the rest of this entry »

Obama Administration Weighs in on Pharmaceutical Representatives Case, Arguing that Reps Are Not Exempt

In Dept. of Labor, Exemptions on August 12, 2010 at 5:08 pm
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Following its stated policy of aggressively prosecuting wage and hour violations, the  Obama administration‘s Department of Labor has filed an amicus brief in the Ninth Circuit case of Buchanan v. SmithKline Beecham Corp., 10-1525, arguing that pharmaceutical representatives are not exempt under the outside sales exemption or the administrative exemption of the FLSA.  You can read more here.

The Second Circuit considered the same issue and found that reps were not exempt under either the outside sales exemption nor the administrative exemption.

By CHARLES H. JUNG

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