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Posts Tagged ‘Peabody v. Time Warner Cable’

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

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