Employment Law Commentary -- Volume 25, Issue 9 -- September 2013: Where Average Isn’t Good Enough: California Courts Continue to Attack Piece-Rate and Commissions Compensation Plans

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Employers who pay non-exempt employees solely on a commissions or piece-rate basis probably know by now that doing so in California is an increasingly risky proposition. Over the past few years, various California courts have issued several opinions requiring employers who use these compensation systems to make them ever more complex to satisfy minimum wage laws. Another recent decision, Bluford v. Safeway, Inc., may mean that employers wanting to limit their exposure and to prevent these types of lawsuits will have to couple any commissions or piece-rate compensation systems for non-exempt employees with one that also pays hourly wages.

Armenta Sends California Courts down the Rabbit Hole -

As previously reported in this Commentary, the California Court of Appeal in 2005 decided Armenta v. Osmose. In Armenta, the employer, a company that installed and maintained utility poles, differentiated between “productive time” (time spent actually working on utility poles), and “nonproductive time” (time spent doing everything else). The class action complaint alleged that employees reported nonproductive time for which they were not paid, or were pressured not to report their nonproductive time by their supervisors. The employees sued, arguing that the employer failed to pay them the minimum wage for their nonproductive hours. The employer claimed that the plaintiffs’ minimum wage theory failed because under thenprevailing federal law, an employer could use a simple average to determine if the employer had satisfied the minimum wage: If total compensation divided by total hours was greater than the minimum wage (accounting for overtime), minimum wage requirements had been met.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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