A recent California labor law decision confirms that even commissioned employees must be paid specifically for rest breaks.
In Vaquero v. Stoneledge Furniture, the California Court of Appeal held that employers must separately compensate commissioned employees for paid rest breaks required by state laws and regulations. Compensation schemes that fail to do so violate California law and can leave employers exposed to class-action lawsuits from employees.
In Vaquero, commissioned former employees of Ashley Furniture HomeStores (Stoneledge’s trade name) alleged that from 2009 through March 2014, Stoneledge failed to pay them for rest breaks in violation of California labor laws. Under Stoneledge’s commission-only compensation scheme, employees stayed on the clock for rest periods but did not receive separate pay specifically for those rest periods and other non-selling time.
Commissioned employees were guaranteed to be paid at least $12.01 per hour, and those who did not make at least $12.01 per hour in commissions in any pay week were paid enough to make up the shortfall—with a catch. The extra pay was actually an “advance” against future commissions that the employee would then be required to repay once his or her commission exceeded a minimum threshold.
Meanwhile, employees who earned more than the weekly minimum did not get paid any extra for their rest periods.
Paid rest breaks required under California law
California’s public policy is to encourage employees to take rest breaks. But employees on activity-based compensation plans (like commissions or piece rates) have a natural disincentive to take rest breaks because whenever they’re not actively working, they can’t be earning.
In the piecework context, California courts and federal courts interpreting California law have combatted this disincentive by interpreting the law to require piece rate employees to be paid separately for their rest breaks. In this way, they can be assured that they will at least earn something while they take a breather. In the Vaquero decision, the Court of Appeal extended this interpretation to commissioned workers, reasoning that there was no justification for treating them any differently from piece rate workers.
The devil’s in the details
Under California Labor Code section 226.7, nonexempt employees must be given at least 10 minutes of paid rest time for every four hours worked “or major fraction thereof.” The California Industrial Welfare Commission Wage Orders—including Wage Order No. 7, which applies to employees in the mercantile industry—makes this rule specifically applicable to most nonexempt employees in the mercantile industry “whether paid on a time, piece rate, commission, or other basis.”
More specifically, Wage Order No. 7 requires employers to count rest breaks as “hours worked for which there shall be no deduction from wages.” This deceptively simple sentence has given employers wiggle room to find ways to not pay employees for rest breaks while still appearing to strictly comply with the letter of the law.
Stoneledge argued that its policy was legally compliant because all rest period time “was recorded and paid as time worked identically with all other time.” But the Court of Appeal noted that this was only the case for employees who made below the weekly minimum in commissions. Employees who earned more than the weekly minimum received no extra pay for their rest periods. Because they were not being paid for rest periods, the commission scheme was illegal as to them.
The court also found the policy violated Wage Order No. 7 as to employees who earned less than the weekly minimum because they had only been loaned the money and would have to return it. These advances against future commissions were in fact not actually “pay” at all. “[T]aking back the money paid to the employee effectively reduces either the rest period compensation or the contractual commission rate, both of which violate California law,” the court held.
Rest breaks are meant for rest
The Vaquero decision is the latest in a long line of cases protecting California employees’ right to paid rest breaks. The Vaquero court reaffirmed several important principles. First, employers must actually pay employees what the law requires, in this case rest-break pay. Employers that fail to do so, and instead try to game the system by creating a veneer of compliance through averages, advances, or other schemes will be held liable to employees. And finally, all California employees should be able to stop and take a rest—without taking food out of their families’ mouths.
“The Court of Appeal recognized that all employees, including commissioned and piece rate employees, are entitled to paid rest breaks,” noted Eric Grover of Keller Grover LLP. If you believe you have been denied rest break pay, a consultation with the employment attorneys at Keller Grover can help you understand your rights and legal options.