The California Court of Appeals has ruled that employees who are paid solely on a commission basis must receive separate compensation for rest breaks. What this means is that even if commission employees are paid advances or draws against future commissions, they must still be paid separate compensation for rest periods and non-productive time.
Coverage: Employers with employees in California who are paid solely on a commission basis.
Effective: Currently in effect.
Action Required: Commission-based compensation agreements are still valid in California. However, employers should ensure that employees paid by commissions are separately compensated for rest breaks and other non-productive time. Therefore you should carefully review and evaluate commission compensation plans to determine whether the plans adequately compensate for rest breaks and non-productive time and make changes to the plan where appropriate.
The Opinion is silent as to how to calculate the rate at which rest breaks must be paid to employees paid on a draw plus commissions plan. Yet, Labor Code section 226.2 may provide some guidance. Although this section applies only to employees compensated by piece-rate, it requires employers to separately compensate piece-rate employees for rest, recovery and other nonproductive time at a regular hourly rate “no less than the higher of”: (1) the “average hourly rate”; or (2) the applicable minimum wage. You should therefore consider adopting this formula.
While our scope of services does not include the review of commission plans we can refer you to a law firm with experience in these matters.
A copy of the opinion is available here: Vaquero, et al. v. Stoneledge Furniture.
As always, please contact your Human Resources Business Partner if you have questions.