Fenwick Employment Brief - June 14, 2011


In this issue: Court Upholds Commisioned Salesperson Exemption; NLRB Continues String of Actions Over Employee Use of Social Media; and News Bites.

Excerpt from "Court Upholds...":

In California, certain commissioned salespersons may be properly classified as exempt from overtime. To qualify, the employee must be paid on a commission basis, in addition to other requirements. State law defines “commissions” as wages based “proportionately upon the amount or value” of property or services sold by the salesperson. In Harris v. Investor’s Business Daily (2006), a California state court held that employees paid on a point system based on the number of newspaper subscriptions sold were not paid on a commission basis, as the point values were not proportionately tied to the subscription price.

However, in Areso v. Carmax, a California court of appeal recently approved a commission plan that paid car salespersons a uniform amount of $150 for the sale of each automobile, and thereby upheld the exempt status of the salespersons. The employer justified the flat payment to avoid having its sales staff push higher priced vehicles to maximize their own commissions. Rejecting the plaintiffs’ argument that the flat payment was akin to the point system struck down in Harris, the court ruled that the flat payment was proportional to the number of vehicles sold, albeit a “one to one proportion,” and therefore a “commission” under California law. The court explained that the compensation was proportional because the salesperson’s “compensation will rise and fall in direct proportion to the number of vehicles sold.”

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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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