Seyfarth Shaw LLP | www.seyfarth.com Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) 17 • The employee’s total compensation exceeds 1.5 times the minimum wage for each hour worked during the pay period (as of Jan. 1, 2024, 1.5 x $16.00 = $24.00) and • At least 50% of the employee’s total compensation comes from commissions.77 Under this exemption, employees are exempt only from overtime pay requirements, and are still subject to California’s requirements to pay minimum wages, as well as to provide meal periods and rest breaks. In Peabody v. Time Warner Cable, Inc., the California Supreme Court provided clarification as to when commissioned salespersons must receive their commissions.78 In that case, the plaintiff worked for Time Warner as a commissioned salesperson. She was paid biweekly, but only the final paycheck of the month contained her commissions. Her first paycheck, meanwhile, generally paid an hourly rate of less than 1.5 times the minimum wage for the hours worked during the pay period corresponding to that paycheck.79 Peabody rejected Time Warner’s argument that it was permissible to pay commissions on a monthly basis; Peabody noted that, except for employees subject to certain special exemptions, wages must be paid at least as often as semi-monthly.80 Peabody also held that commissions paid in one pay period could not be attributed to earlier pay periods in order to satisfy the minimum earnings requirement for the commission sales exemption.81 Thus, although Time Warner’s commissioned salespersons earned more than 1.5 times the minimum wage when their monthly earnings were averaged out over all hours worked during the month, it was improper to perform such averaging when determining whether the employees met the requirements for the commissioned salesperson exemption. Therefore, during the pay periods where the plaintiff did not receive any commission payment, she did not meet the exemption and was entitled to premium overtime pay.82 Consistent with Peabody, employers with commissioned employees should review current payroll practices to ensure that these employees are paid more than 1.5 times the California minimum wage during each individual pay period, to take advantage of the Wage Order overtime exemption for commissioned salespersons. 77 Cal. Code Regs. tit. 8, § 11040(3) (D). 78 Peabody v. Time Warner Cable, Inc., 59 Cal. 4th 662 (2014). 79 Id. at 665-66. 80 Id. at 668. 81 Id. at 668-70. 82 Id.
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