9 Cal. App. 5th 98
Cal. Ct. App.2017Background
- Plaintiffs (Vaquero and Schaefer) were commissioned sales associates at Stoneledge Furniture (Ashley Furniture HomeStores) from Sept. 30, 2009 to Mar. 29, 2014, subject to a commission pay agreement with a guaranteed minimum hourly "draw" ($12.01/hr) advanced against future commissions.
- Stoneledge tracked hours (clock‑in/out) and permitted paid rest breaks (10 minutes per 4 hours), but associates did not clock out for rest breaks; rest time was recorded as hours worked.
- Under the 2009–2014 commission plan, commissions were calculated from sales; when commissions fell below the guaranteed minimum, Stoneledge advanced a draw and later deducted (clawed back) those advances from future commissions.
- Plaintiffs sued as a class alleging unpaid rest periods (Lab. Code §226.7 and Wage Order No. 7), unpaid wages at termination (§203), UCL, and declaratory relief. The trial court granted summary judgment for Stoneledge, finding the company’s system paid for all hours including rest periods.
- The Court of Appeal reversed, holding (1) Wage Order No. 7 requires separate compensation for rest periods when the compensation system does not directly account for them, and (2) that requirement applies to commissioned employees; Stoneledge’s draw/advance scheme did not satisfy it.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Wage Order No. 7 require separate compensation for rest periods when the pay system does not directly pay for them? | Rest period time must be separately compensated; wage orders count rest as hours worked and prohibit deductions. | Wage orders are satisfied if total pay across a pay period covers rest time; no separate payment required. | Held: Wage Order No.7 requires separate compensation for rest periods where the pay plan does not directly compensate that time. |
| Does that rule apply to employees paid on commission? | Yes; Wage Order No.7 expressly covers commission pay and protects all employees from schemes that effectively average or deduct pay. | Commission plans differ from piece‑rate; statutory provisions (e.g., §226.2) regarding piece‑rate workers shouldn't be extended to commissioned employees. | Held: The wage order applies to commissioned employees; commission plans must separately account for paid rest periods. |
| Can advances/draws against future commissions (then clawed back) constitute lawful compensation for rest periods? | Advances were not true compensation if later deducted; they are loans and cannot be used to satisfy the requirement to separately pay for rest periods. | The draw/advance ensured employees received at least the guaranteed minimum per hour, satisfying rest‑period pay. | Held: Draws that are later recouped do not constitute separate compensation for rest periods; Stoneledge’s scheme failed to separately compensate rest time. |
| Was the trial court’s summary judgment for Stoneledge proper? | N/A (plaintiffs appealed). | Trial court: summary judgment proper because hours (including breaks) were tracked and guarantees ensured pay. | Held: Reversed — summary judgment and adjudication on §226.7 were erroneous; remanded for further proceedings on remaining claims. |
Key Cases Cited
- Augustus v. ABM Security Services, Inc., 2 Cal.5th 257 (California Supreme Court 2016) (labor statutes and wage orders are liberally construed to protect employees)
- Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004 (California Supreme Court 2012) (employer must authorize and permit rest breaks; wage orders have statutory dignity and are construed to protect workers)
- Bluford v. Safeway Stores, Inc., 216 Cal.App.4th 864 (Cal. Ct. App. 2013) (piece‑rate pay that does not directly compensate rest periods violates wage orders requiring separate compensation)
- Armenta v. Osmose, Inc., 135 Cal.App.4th 314 (Cal. Ct. App. 2005) (minimum/contract wage applies to each hour worked; employers may not average wages across pay periods to meet minimum wage)
- Gonzalez v. Downtown LA Motors, LP, 215 Cal.App.4th 36 (Cal. Ct. App. 2013) (wage orders apply uniformly regardless of compensation method)
- Murphy v. Kenneth Cole Productions, Inc., 40 Cal.4th 1094 (California Supreme Court 2007) (denial of rest periods results in uncompensated work; rest breaks cannot be waived)
- Peabody v. Time Warner Cable, Inc., 59 Cal.4th 662 (California Supreme Court 2014) (DLSE Manual interpretations can be persuasive in construing wage orders)