WE recently discussed the problems surrounding employees who are paid only by commission. One of the problems we pointed out was that commissioned employees are often shortchanged when it comes to their rights to rest breaks.
Under California law, an employer shall not require an employee to work during a rest period. If an employer fails to provide an employee a rest period, the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the rest period is not provided.
Employees who are paid on a commission plan are still entitled to rights that are provided to hourly employees, such as the right to be provided off-duty rest periods, and the right to be paid at their regular rate of compensation if their employer fails to provide them off-duty rest periods. How important is the employer’s duty to abide by these rules? Consider the following case:
Jacqueline Ibarra worked as a home mortgage consultant for Wells Fargo bank. Consultants like her were paid on commission. Employees who did not earn enough commissions were paid a base hourly wage that was then deducted from the employees’ future earned commissions. When it paid employees an hourly wage, Wells Fargo would reduce the employees’ wages to adjust for rest breaks like they were hourly employees even though they are paid purely by commission.
Ibarra sued on behalf of herself and other mortgage consultants alleging that Wells Fargo’s commission plan violated California law. The employees also claimed unpaid wages for non-sale but work-related activities such as attending mandatory meetings, training, or networking events.
The trial court ruled that Wells Fargo had violated labor laws and was liable for damages. The court then had to decide how compensation should be calculated under the California Labor Code.
The employees argued that their compensation should be based on the entirety of their wages, including commissions. Wells Fargo argued that the employees should be paid at the “regular rate of compensation” which meant the employees’ base hourly pay.
As reported by the Daily Journal, the trial court ruled that since the employees were paid by commission, the employees’ “regular rate of compensation” is not the hourly pay but the commission pay. The court cited the Fair Labor Standards Act, which used the phrase ‘regular rate at which [the employee] is employed,’ which in this instance means the employees’ method of wage payment.
Thus, in computing the employees’ damages, the court ruled that Wells Fargo must pay the employees $97.3 million in back wages.
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The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost. You can contact the office at (818) 291-0088 or visit www.joesayaslaw.com or our Facebook page Joe Sayas Law. [C. Joe Sayas, Jr., Esq. is an experienced trial attorney who has successfully recovered wages and other monetary damages for thousands of employees and consumers. He was named Top Labor & Employment Attorney in California by the Daily Journal, consistently selected as Super Lawyer by the Los Angeles Magazine, and is the recipient of PABA’s Community Champion Award for 2016.]