In Vaquero v. Stoneledge Furniture, a California appellate court has ruled that employees who are compensated with commissions must be separately compensated for state-mandated rest breaks.
As most California employers are aware, they must provide non-exempt employees with a 10 minute rest break for every four hours of work or every major fraction thereof. Employees must also receive compensation for this time, even though they are technically not working.
Under Stoneledge’s commission agreements, the sales employees were paid on a commission basis. However, if an employee failed to earn an amount of commission equal to at least $12.01 per hour for time worked, then Stoneledge “topped up” the employee’s commissions to cover the difference. If, in subsequent pay periods, the employee earned commissions in excess of $12.01 per hour, Stoneledge charged backed the amount it had topped up in the prior pay periods.
The plaintiffs argued that their commissions could not be used to cover their paid rest break time because it is impossible to earn a commission while they are on a break. Stoneledge argued that the $12.01 per hour guarantee included time employees spent on rest breaks so employees were paid for the time they spent on break. The court disagreed, finding that the recoupment of the draw from future commissions effectively nullified the hourly pay which, in the court’s opinion, is the only way employees can be paid for rest breaks. Accordingly, in situations where employees are effectively paid on a commission only basis, employers must separately compensate the employees for their rest breaks with an hourly rate of pay.
Whether this case remains citable authority remains to be seen. In the interim, employers should be mindful of how they compensate their employees for rest breaks and consult counsel before implementing non-hourly compensation programs for non-exempt employees.