Vaquero v. Stoneledge Furniture, LLC

Filed 2/28/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
RICARDO BERMUDEZ VAQUERO B269657
et al.,
(Los Angeles County
Plaintiffs and Appellants, Super. Ct. No. BC522676)
v.
STONELEDGE FURNITURE LLC,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Elihu Berle, Judge. Reversed and remanded
with directions.
Cohelan Khoury & Singer, Michael D. Singer, Jeff Geraci;
Law Offices of Raphael A. Katri, Raphael A. Katri; Law Offices of
Kevin T. Barnes, Kevin T. Barnes and Gregg Lander for
Plaintiffs and Appellants.
Littler Mendelson, J. Kevin Lilly and Scott M. Lidman for
Defendant and Respondent.
INTRODUCTION
Are employees paid on commission entitled to separate
compensation for rest periods mandated by state law? If so, do
employers who keep track of hours worked, including rest
periods, violate this requirement by paying employees a
guaranteed minimum hourly rate as an advance on commissions
earned in later pay periods? We answer both questions in the
affirmative, and reverse the trial court’s ruling granting
summary judgment in favor of the employer.
FACTUAL AND PROCEDURAL BACKGROUND
Ricardo Bermudez Vaquero and Robert Schaefer worked as
Sales Associates for Stoneledge Furniture, LLC, a retail furniture
company doing business in California as Ashley Furniture
HomeStores. After termination of their employment, Vaquero
and Schaefer filed a class action complaint alleging that
Stoneledge’s commission pay plan did not comply with California
law. The parties largely agree on the relevant facts regarding
Stoneledge’s employee compensation system.
A. Stoneledge’s Compensation System
From 2009 through March 29, 2014 Stoneledge
compensated Sales Associates pursuant to the Sales Associate
Commission Compensation Pay Agreement. After a training
period during which new employees received $12.01 per hour,
Stoneledge paid sales associates on a commission basis. If a sales
associate failed to earn “Minimum Pay” of at least $12.01 per
hour in commissions in any pay period, Stoneledge paid the
2
associate a “draw” against “future Advanced Commissions.” The
commission agreement explained: “The amount of the draw will
be deducted from future Advanced Commissions, but an
employee will always receive at least $12.01 per hour for every
hour worked.” The commission agreement included a table
providing an example of how the draw and Advanced
Commissions system worked, assuming 40 hours of “non-
Training Time” in a work week:
Week # Min. Weekly Advanced Gross Week Draw Cumulative
Weekly Pay Commission Pay (Owe) Draw (Owe)
1 $480.40 $300 $480.40 $180.40 $180.40
2 $480.40 $400 $480.40 $80.40 $260.80
3 $480.40 $550 $480.40 -$69.60 $191.20
4 $480.40 $800 (-$191.20 draw) $608.80 $0 $0
5 $480.40 $750 $750 $0 $0
The commission agreement did not provide separate
compensation for any non-selling time, such as time spent in
meetings, on certain types of training, and during rest periods.
Sales associates recorded this time, however, using Stoneledge’s
electronic timekeeping system. Sales associates clocked into the
system at the start of each shift, clocked out and back in for meal
periods, and clocked out again when their shifts ended. Sales
associates did not clock out for rest periods. Stoneledge
authorized and permitted sales associates to take rest periods of
at least 10 consecutive minutes for every four hours worked or
major fraction thereof.
Stoneledge contends that under its compensation plan “all
time during rest periods was recorded and paid as time worked
identically with all other work time. . . . [¶¶] Thus, Sales
Associates are paid at least $12 per hour even if they make no
sales at all.” Although Stoneledge deducted from sales associates’
3
paychecks any previously paid draw on commissions, Stoneledge
states such “repayment [was] never taken if it would result in
payment of less than the [Minimum Pay of $12.01 per hour] for
. . . all time worked in any week.”
Effective March 30, 2014, Stoneledge implemented a new
commission agreement that pays sales associates a base hourly
wage of $10 “for all hours worked.” In addition, sales associates
can earn various types of incentive payments based on a
percentage of sales. Under the new agreement, no portion of a
sales associate’s base pay is deducted from or credited against
incentive payments.
B. The Litigation
Vaquero and Schaefer filed a putative class action alleging
causes of action for failure to provide paid rest periods under
Labor Code section 226.71 and the applicable wage order, failure
to pay all wages owed upon termination under section 203, unfair
business practices, and declaratory relief.2 Pursuant to the
parties’ stipulation, the trial court certified a class comprised of
three subclasses of sales associates corresponding to the
plaintiffs’ three primary claims: unpaid rest periods, unpaid
wages upon termination, and unfair business practices. The class
is limited to sales associates employed by Stoneledge in
1 Undesignated statutory references are to the Labor Code.
2 The plaintiffs previously filed an action in state court
claiming Stoneledge’s compensation plan violated California’s
wage and hour laws, which Stoneledge removed to federal court.
(See Vaquero v. Ashley Furniture Industries, Inc. (9th Cir. 2016)
824 F.3d 1150, 1152.)
4
California from September 30, 2009 through March 29, 2014, the
time period during which the previous commission agreement
was in effect.
Stoneledge filed a motion for summary judgment or in the
alternative for adjudication, arguing that the rest period claim
failed as a matter of law because Stoneledge paid its sales
associates a guaranteed minimum for all hours worked, including
rest periods. With respect to the claim for violation of section
203, Stoneledge argued a claim for rest period “premium pay” is
not an action to recover “wages” under section 203 and, in any
event, Stoneledge did not “willfully” fail to pay wages, as required
for a violation of section 203. Stoneledge argued that, because
the class claims for failure to pay for rest periods and for wages
owed at termination failed as a matter of law, the derivative
claim for unfair business practices also failed.
The trial court granted Stoneledge’s motion and entered
judgment for Stoneledge. The court found “Stoneledge’s payment
system specifically accounted for all hours worked . . . and
guaranteed that [sales associates] would be paid more than the
$12 an hour for those hours. With this system there was no
possibility that the employees’ rest period time would not be
captured in the total amount paid each pay period.” The court
stated, “By tracking all the hours that its sales associates and
employees were present at the facility, including rest periods,
Stoneledge was able to ensure that the compensation it paid its
employees via commission would never fail to include payment
for the time employees spent taking their mandatory rest
periods. [¶¶] Under Stoneledge’s plan . . . sales associates are
uniformly paid at or above a rate which expressly encompasses
all the time present in the workplace and all the time worked,
5
including rest periods.” The court therefore granted Stoneledge’s
motion for summary adjudication on the cause of action for
violation of section 226.7.
The trial court, without examining the merits of the
remaining claims, concluded they all failed because they were
derivative of the rest period claim. The court stated, “With
regard to the . . . causes of action for violation of Labor Code
section 203, unfair business practices and declaratory relief, each
of those causes of action are derivative of the . . . cause of action
for failure to pay rest periods. [¶¶] Absent a failure by
Stoneledge to pay plaintiffs for the required rest period, there
would, as a consequence, be no unpaid wages remaining at the
termination of the employment. Likewise, there would be no
unfair business practice claim under [Government Code] section
17200. And the declaratory relief claim would also fail absent the
underlying statutory violation upon which the cause of action is
based.” The plaintiffs timely appealed from the judgment.
DISCUSSION
A. Wage Order No. 7 and Compensation for Rest Periods
The Legislature authorized the Industrial Welfare
Commission (IWC) to regulate the wages, hours, and working
conditions of various classes of workers to protect their health
and welfare. (Augustus v. ABM Security Services, Inc. (2016) 2
Cal.5th 257, 263; Rodriguez v. E.M.E., Inc. (2016) 246
Cal.App.4th 1027, 1033.) “To this end, the IWC promulgated so-
called wage orders . . . for workers in a number of industries and
6
occupations.” (Rodriguez, at pp. 1033-1034.)3 “As a consequence,
‘wage and hour claims are today governed by two complementary
and occasionally overlapping sources of authority: the provisions
of the Labor Code, enacted by the Legislature, and a series of 18
wage orders, adopted by the IWC.’” (Rodriguez, at p. 1034; see
Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th
1004, 1026.) “Those laws and wage orders are also subject to
enforcement by a state agency, namely, the Division of Labor
Standards Enforcement (DLSE).” (Rodriguez, at p. 1034; see
Brinker, at pp. 1028-1029 & fn. 11.)4
“An employer is required to authorize and permit the
amount of rest break time called for under the wage order for its
industry.” (Brinker, supra, 53 Cal.4th at p. 1033.) The rest
period claim here is based on section 226.7 and Wage Order
No. 7-2001, which applies to the mercantile industry. (See
Cal. Code Regs. tit. 8, § 11070, subds. 1, 2(H) [defining
“[m]ercantile [i]ndustry”] (Wage Order No. 7).)
3 Although the IWC was defunded in 2004, its wage orders
remain in effect. (Gonzalez v. Downtown LA Motors, LP (2013)
215 Cal.App.4th 36, 43; Soderstedt v. CBIZ Southern California,
LLC (2011) 197 Cal.App.4th 133, 145, fn. 1.)
4 “The DLSE is a division of the Department of Industrial
Relations . . . , which is a department of California's Labor and
Workforce Development Agency.” (Gomez v. J. Jacobo Farm
Labor Contractor, Inc. (E.D. Cal. 2016) 188 F.Supp.3d 986, 997,
fn. 13.)
7
Section 226.7 provides: “An employer shall not require an
employee to work during a meal or rest or recovery period
mandated pursuant to an applicable statute, or . . . order of the
[IWC].” (§ 226.7, subd. (b).) “If an employer fails to provide an
employee a meal or rest or recovery period in accordance with a
state law, including, but not limited to, an . . . order of the
[IWC], . . . the employer shall pay the employee one additional
hour of pay at the employee’s regular rate of compensation for
each workday that the meal or rest or recovery period is not
provided.” (§ 226.7, subd. (c).)
Wage Order No. 7 applies “to all persons employed in the
mercantile industry whether paid on a time, piece rate,
commission, or other basis.” (Cal. Code Regs. tit. 8, § 11070,
subd. 1.) Subdivision 4 of Wage Order No. 7 establishes an
employer’s duty to pay such employees the minimum wage “for
all hours worked.” (Id., § 11070, subd. 4(A).)5 With respect to
rest periods, Wage Order No. 7 provides: “Every employer shall
authorize and permit all employees to take rest periods, which
insofar as practicable shall be in the middle of each work period.
The authorized rest period time shall be based on the total hours
worked daily at the rate of ten (10) minutes net rest time per four
(4) hours or major fraction thereof. However, a rest period need
5 Subdivision 2(G) of Wage Order No. 7 defines “hours
worked” as “the time during which an employee is subject to the
control of an employer, and includes all the time the employee is
suffered or permitted to work, whether or not required to do so.”
(Cal. Code Regs. tit. 8, § 11070, subd. 2(G).) “Wages” includes “all
amounts for labor performed by employees of every description,
whether the amount is fixed or ascertained by the standard of
time, task, piece, commission basis, or other method of
calculation.” (Id., § 11070, subd. 2(O).)
8
not be authorized for employees whose total daily work time is
less than three and one-half (3 1/2) hours. Authorized rest period
time shall be counted as hours worked for which there shall be no
deduction from wages.” (Cal. Code Regs. tit. 8, § 11070, subd.
12(A), italics added.) Like section 226.7, subdivision (c), Wage
Order No. 7 further requires an employer who fails to provide an
employee a rest period in accordance with the wage order’s
provisions to pay the employee one hour of pay at the employee’s
regular rate of compensation for each work day the employer did
not provide the employee with the rest period. (Id., § 11070,
subd. 12(B).)
“Wage orders are quasi-legislative regulations and are
construed in accordance with the ordinary principles of statutory
interpretation.” (Gonzalez v. Downtown LA Motors, LP (2013)
215 Cal.App.4th 36, 43; see Aleman v. AirTouch Cellular (2012)
209 Cal.App.4th 556, 568; see also Brinker, supra, 53 Cal.4th at
p. 1027 [“[t]he IWC’s wage orders are to be accorded the same
dignity as statutes”].) “Generally, ‘[w]hen a wage order’s validity
and application are conceded and the question is only one of
interpretation, the usual rules of statutory interpretation apply.’”
(Rodriguez, supra, 246 Cal.App.4th at p. 1034; see Brinker,
at p. 1027.)
“The task of interpretation is to determine the legislative
intent, looking first to the words of the wage order, construed in
light of their ordinary meaning and statutory context.”
(Rodriguez, supra, 246 Cal.App.4th at p. 1034; see Brinker,
supra, 53 Cal.4th at p. 1026; Gonzalez, supra, 215 Cal.App.4th at
p. 43.) “If the language of the wage order is clear, it is applied
without further inquiry. [Citation.] If the language can be
interpreted to have more than one reasonable meaning, a court
9
may consider ‘“a variety of extrinsic aids, including the ostensible
objects to be achieved, the evils to be remedied, the legislative
history, public policy, contemporaneous administrative
construction, and the statutory scheme of which the statute is a
part.”’” (Gonzales, at p. 44; see Aleman, supra, 209 Cal.App.4th
at pp. 568-569.) “‘Judicial construction that renders any part of
the wage order meaningless or inoperative should be avoided.’”
(Rodriguez, at p. 1034; accord, Brinker, at p. 1026; Gonzalez,
at p. 44.) DLSE opinion letters, while not controlling, constitute
“the type of experience and considered judgment that may
properly inform our judgment.” (Augustus, supra, 2 Cal.5th
at p. 267; see Brinker, supra, 53 Cal.4th at p. 1029, fn. 11;
Rodriguez, at p. 1034.)
In general, “‘[s]tate wage and hour laws “reflect the strong
public policy favoring protection of workers’ general welfare and
‘society’s interest in a stable job market.’”’” (Gonzales, supra, 215
Cal.App.4th at p. 44; see Cash v. Winn (2012) 205 Cal.App.4th
1285, 1297.) “They are therefore liberally construed in favor of
protecting workers. As our Supreme Court has stated, ‘“[i]n light
of the remedial nature of the legislative enactments authorizing
the regulation of wages, hours and working conditions for the
protection and benefit of employees, the statutory provisions are
to be liberally construed with an eye to promoting such
protection.”’” (Gonzales, at p. 44, quoting Brinker, supra, 53
Cal.4th at pp. 1026-1027; see Augustus, supra, 2 Cal.5th at p. 262
[“we liberally construe the Labor Code and wage orders to favor
the protection of employees”]; Peabody v. Time Warner Cable, Inc.
(2014) 59 Cal.4th 662, 667 [“[s]tatutes governing conditions of
employment are to be construed broadly in favor of protecting
10
employees”]; Murphy v. Kenneth Cole Productions, Inc. (2007) 40
Cal.4th 1094, 1103 [same].)
The trial court concluded that Wage Order No. 7 did not
require Stoneledge to pay its commissioned employees separately
for their rest periods and that Stoneledge’s commission
agreement “specifically accounted for all hours worked by the
salespersons,” including rest periods. We review this conclusion,
which the trial court reached on summary judgment, and the
court’s interpretation of Wage Order No. 7, de novo. (Schachter v.
Citigroup, Inc. (2009) 47 Cal.4th 610, 618; Rodriguez, supra, 246
Cal.App.4th at p. 1032; Gonzales, supra, 215 Cal.App.4th at p. 44;
see Araquistain v. Pacific Gas & Electric Company (2014) 229
Cal.App.4th 227, 231 [“‘the interpretation and application of a
statutory scheme to an undisputed set of facts is a question of law
[citation] which is subject to de novo review on appeal’”].)
B. Wage Order No. 7 Requires Employers To Separately
Compensate Covered Employees for Rest Periods
The parties agree that Wage Order No. 7 applies to
Stoneledge’s sales associates and that Stoneledge permitted and
authorized the rest periods mandated by California law and
Wage Order No. 7. The parties disagree, however, whether
California law, including Wage Order No. 7, required Stoneledge
to separately compensate its sales associates for such rest
periods. We conclude it does.
The plain language of Wage Order No. 7 requires
employers to count “rest period time” as “hours worked for which
there shall be no deduction from wages.” (Cal. Code Regs. tit. 8,
§ 11070, subd. 12(A), italics added.) In Bluford v. Safeway Stores,
Inc. (2013) 216 Cal.App.4th 864 the court interpreted this
11
language to require employers to “separately compensate[ ]”
employees for rest periods where the employer uses an “activity
based compensation system” that does not directly compensate
for rest periods. (Id. at p. 872.)
Bluford involved Safeway truck drivers who sued Safeway
for, among other things, failing to provide paid rest periods.
(Bluford, supra, 216 Cal.App.4th at p. 868.) Safeway paid the
drivers “based on mileage rates applied according to the number
of miles driven, the time when the trips were made, and the
locations where the trips began and ended.” (Id. at p. 872.)
Safeway asserted it intended to pay drivers for their rest periods
and its compensation system purportedly subsumed those
payments into the mileage rates Safeway negotiated in the
drivers’ collective bargaining agreement. (Id. at p. 871.) None of
the bases on which Safeway paid its drivers, however, directly
compensated them for rest periods. (Id. at p. 872.)
The court found Safeway’s compensation system violated
California law because the wage order applicable in that case,
like Wage Order No. 7, prohibited employers from “deduct[ing]
wages for rest periods.”6 (Bluford, supra, 216 Cal.App.4th at p.
871.) The court explained “[t]he wage order’s requirement not to
deduct wages for rest periods presumes the drivers are paid for
their rest periods.” (Ibid.) In the context of a piece-rate
compensation plan like the one used by Safeway,7 this
6 Like Wage Order No. 7, the wage order in Bluford counted
authorized rest periods as “hours worked.” (See Bluford, supra,
216 Cal.App.4th at p. 871, citing Wage Order Nos. 7, 9, Cal. Code
Regs. tit. 8, §§ 11070, subd. 12; 11090, subd. 12.)
7 Under a “piece-rate” compensation system, employers pay
employees “according to the number of units turned out,” for
12
requirement means that employers must separately compensate
employees for rest periods. (Id. at p. 872.)
Bluford relied on Armenta v. Osmose, Inc. (2005) 135
Cal.App.4th 314, which held that employers cannot comply with
minimum wage obligations by averaging wages across multiple
pay periods; instead, “[t]he minimum wage standard applies to
each hour worked by [employees] for which they were not paid.”
(Id. at p. 324.) In Armenta, the court addressed a compensation
plan that paid employees only for “productive” time, and not for
“nonproductive” time such as time spent traveling between job
sites. The court explained that California wage orders (like Wage
Order No. 7) that require employers to compensate employees
“for all hours worked” require employers to pay employees for “all
hours,” including nonproductive time, “at the statutory or agreed
rate and no part of this rate may be used as a credit against a
minimum wage obligation.” (Armenta, supra, 135 Cal.App.4th at
p. 323.) Thus, under California law, the minimum or contracted
wage requirement “applies to each hour worked by [employees]
for which they [are] not paid.” (Id. at p. 324.)
Piece-rate compensation plans do not directly account for
rest periods during which, like the nonproductive hours in
Armenta, employees cannot earn wages. The court in Bluford
held that allowing employers like Safeway to account for rest
periods indirectly by negotiating a purportedly higher piece rate
violates the principles set forth in Armenta because such
compensation plans effectively “averag[e] pay to comply with the
minimum wage law instead of separately compensating
example, the amount of produce harvested, the number of miles
driven, or the yard of carpet installed. (See DLSE, Enforcement
Policies and Interpretations Manual (Mar. 2006) § 2.5.1, p. 2-2.)
13
employees for their rest periods at the minimum or contractual
hourly rate.” (Bluford, supra, 216 Cal.App.4th at p. 872.)
We agree with Bluford that Wage Order No. 7 requires
employers to separately compensate employees for rest periods if
an employer’s compensation plan does not already include a
minimum hourly wage for such time. (See Gonzales, supra, 215
Cal.App.4th at pp. 48-49 [concluding that the identical language
in Wage Order No. 4 requires employers to separately pay piece-
rate workers for nonproductive time].) All of the federal courts
that have considered this issue of California law have reached a
similar conclusion and have held employers must separately
compensate employees paid by the piece for nonproductive work
hours. (See Perez v. Sun Pacific Farming Co-op., Inc. (E.D. Cal.,
June 8, 2015, No. 1:15-CV-00259-KJM-SKO) 2015 WL 3604165,
pp. 5-7; Ridgeway v. Wal-Mart Stores, Inc. (N.D. Cal. 2015) 107
F.Supp.3d 1044, 1053; Reinhardt v. Gemini Motor Transport
(E.D. Cal. 2012) 869 F.Supp.2d 1158, 1168; Carrillo v. Schneider
Logistics, Inc. (C.D. Cal. 2011) 823 F.Supp.2d 1040, 1044;
Cardenas v. McLane FoodServices, Inc. (C.D. Cal. 2011) 796
F.Supp.2d 1246, 1252; Ontiveros v. Zamora (E.D. Cal., Feb. 20,
2009, No. CIV.S-08-567 LKK/DAD) 2009 WL 425962, p. 3.)8
8 Stoneledge argues the plaintiffs’ reliance on federal cases
interpreting California employment law is misplaced. It is
proper, however, to look to federal decisions interpreting
California law where the reasoning is “analytically sound.”
(Futrell v. Payday California, Inc. (2010) 190 Cal.App.4th 1419,
1432; see id. at p. 1432, fn. 6 [“[a]lthough not binding precedent
on our court, we may consider relevant, unpublished federal
district court opinions as persuasive”]; Gonzales, supra, 215
Cal.App.4th at p. 49 [a federal case applying California
employment law is “instructive” where it involves similar facts].)
14
C. The Requirement To Separately Compensate for Rest
Periods Applies to Employees Paid on Commission
Neither Bluford nor the federal cases applying California
law involved employees paid on commission. Nor did any of those
cases address the issue whether the requirement of separately
compensating employees for rest periods applies to commissioned
employees. We conclude, however, that Wage Order No. 7 applies
equally to commissioned employees, employees paid by piece rate,
or any other compensation system that does not separately
account for rest breaks and other nonproductive time.
The plain language of Wage Order No. 7 covers employees
paid by commission. (See Cal. Code Regs. tit. 8, § 11070, subd. 1
[applying to “all persons employed in the mercantile industry
whether paid on a time, piece rate, commission, or other basis”];
id. at § 11070, subd. 2(O) [“wages” includes “amounts for labor
performed by employees of every description, whether the
amount is fixed or ascertained by the standard of time, task,
piece, commission basis, or other method of calculation”].)
Where, as here, the language of a wage order is unambiguous, it
is dispositive. (Brinker, supra, 53 Cal.4th at p. 1028; see also
Gonzales, supra, 215 Cal.App.4th at p. 49 [the wage order “does
not allow any variance in its application based on the manner of
compensation”].)
Moreover, nothing about commission compensation plans
justifies treating commissioned employees differently from other
employees. (See Gonzales, supra, 215 Cal.App.4th at p. 49
[“[t]hat [defendant] compensated its technicians on a piece-rate
basis is not a valid ground for varying either the application or
15
interpretation of the wage order”];9 Ridgeway, supra, 107
F.Supp.3d at pp. 1052-1053 [“differences in pay structure are
non-dispositive of the issue . . . whether plaintiffs must be paid
for all hours worked”]; Cardenas, supra, 796 F.Supp.2d at p. 1252
[distinctions in payment systems do not detract from the holding
in Armenta that employers must compensate for “all hours
worked”].) The commission agreement used by Stoneledge during
the class period is analytically indistinguishable from a piece-rate
system in that neither allows employees to earn wages during
rest periods. Indeed, the purpose of a rest period is to rest, not to
work. (See § 226.7, subd. (b) [an employer may not require an
employee “to work during a meal or rest or recovery period
mandated pursuant to an applicable [wage] order”]; Augustus,
supra, 2 Cal.5th at p. 273 [“[a] rest period, in short, must be a
period of rest”]; Perez, supra, 2015 WL 3604165 at p. 7 [“[w]hen
an employer pays its employees by the piece . . . those employees
cannot add to their wage during rest breaks; a break is not for
rest if piece-rate work continues”]; DLSE, Enforcement Policies
9 Gonzales acknowledged the trial court in that case did not
address, and therefore the Gonzales court did not consider on
appeal, an employer’s obligations with respect to “mandatory rest
breaks” or “employees who are compensated under commission
payment plans or any other incentive-based compensation
systems.” (Gonzales, supra, 215 Cal.App.4th at p. 54.)
Stoneledge argues that this statement somehow precludes our
conclusion that the reasoning of Armenta, Gonzales, and Bluford
applies to employees paid by commission. At best, Stoneledge
misreads Gonzales when it argues that Gonzales “expressly
refused to extend” Armenta and Bluford (which was actually
decided after Gonzales) to commission pay plans. Gonzales does
not hold or say any such thing.
16
and Interpretations Manual (Mar. 2006) § 45.3.3, p. 45-8 [“the
rest period begins when the employee reaches an area away from
the work station that is appropriate for rest”].)
Stoneledge argues that commission sales may continue
through rest periods because “sales and resultant commissions
are routinely earned while employees are not present, including
while on break.” Stoneledge cites no authority or evidence in the
record for this assertion. It also makes no sense to assume that a
commission-based employee who works 100 minutes per 40-hour
work week longer than another employee—for example, by
greeting new customers, following-up with potential leads, or
answering emails and phone calls related to pending orders—
would not earn more in commissions than the employee who
spent those same 100 minutes in a break room. (See Cicairos v.
Summit Logistics, Inc. (2005) 133 Cal.App.4th 949, 963 [citing
testimony that an employee did not take rest breaks because
“rest break[s] would cost me money”]; Balasanyan v. Nordstrom,
Inc. (S.D. Cal. 2013) 294 F.R.D. 550, 560 [“salespeople may have
a difficult time selling to customers [and earning commissions]
when they are not available to customers”].) Stoneledge admits
as much when it concedes “[t]he only opportunity lost by taking a
rest period is to make a sale that would increase wages beyond
the $12 minimum weekly pay rate.”
The DLSE Enforcement Policies and Interpretations
Manual supports our conclusion. Section 47.7 of the DLSE
Manual, entitled “All Hours Must Be Compensated Regardless Of
Method Used In Computation,” states that “if, as a result of the
directions of the employer, the compensation received by piece
rate or commissioned workers is reduced because they are
precluded, by such directions of the employer, from earning either
17
commissions or piece rate compensation during a period of time,
the employee must be paid at least the minimum wage (or
contract hourly rate if one exists) for the period of time the
employee’s opportunity to earn commissions or piece rate [is
reduced].” (DLSE, Enforcement Policies and Interpretations
Manual (Mar. 2006) § 47.7, p. 47-7, italics added; see Peabody,
supra, 59 Cal.4th 662, 670 [adopting the DLSE Manual’s
interpretation of a wage order even though “the DLSE’s
enforcement policies are not entitled to deference”]; See’s Candy
Shops, Inc. v. Superior Court (2012) 210 Cal.App.4th 889, 902
[although “statements in the DLSE Manual are not binding on
the courts because the rules were not adopted under the
Administrative Procedure Act,” they “may be considered for their
persuasive value”]; accord, Augustus, supra, 2 Cal.5th at p. 262;
Brinker, supra, 53 Cal.4th at p. 1029, fn. 11.) Thus, the DLSE
Manual treats commissioned and piece-rate employees alike for
purposes of applying the minimum wage requirement to
nonproductive working hours. There is no reason California law
should not treat these categories of workers the same for
purposes of complying with the requirement to provide paid rest
periods.
Stoneledge responds to the DLSE Manual’s interpretation
of the Labor Code and wage orders by seizing on the language
that refers to tasks performed “as a result of the directions of the
employer” and arguing that, because rest breaks for
commissioned employees do not fall into this category, the DLSE
Manual’s guidance is not persuasive. The trial court agreed with
this argument, stating that rest periods are “readily
distinguishable from the required yet uncompensated work” at
issue in other cases. Both Stoneledge and the trial court,
18
however, improperly discount the language of Wage Order No. 7,
which counts rest periods as “hours worked” and requires
compensation for those hours even though rest periods are,
admittedly and by design, nonproductive. (Cal. Code Regs. tit. 8,
§ 11070, subd. 12(A); see DLSE Manual, § 45.3.2, at p. 45-8
[subdivision 12 of each wage order “requires that the rest period
time shall be counted as hours worked for which there shall be no
deduction from wages”].) In addition, by requiring employers to
compensate a commissioned employee for time during which the
employee is working but precluded from selling (such as while in
a department meeting or training session), section 47.7 of the
DLSE Manual does not negate that requirement for time
attributable to rest periods. It simply makes clear that
commissioned employees, like all employees subject to Wage
Order No. 7, are entitled to compensation for each hour worked.
Moreover, California law and public policy have long
viewed mandatory rest periods “‘as part of the remedial worker
protection framework’” and require us to construe Wage Order
No. 7 to “best effectuate[ ] that protective intent.” (Brinker,
supra, 53 Cal.4th at p. 1027; accord, Rodriguez, supra, 246
Cal.App.4th at p. 1039.) Indeed, the Legislature views the right
to a rest period as so sacrosanct that it is unwaivable. (See § 219
[“[n]othing in this article [including section 226.7] . . . can in any
way be contravened or set aside by a private agreement”];
Brinker, 53 Cal.App.4th at p. 1033 [right to rest breaks cannot be
waived].) Compensation plans that do not compensate employees
directly for rest periods undermine this protective policy by
discouraging employees from taking rest breaks. (See Augustus,
supra, 2 Cal.5th at p. 271 [requiring security guards to take “on-
call rest periods” would “undermine the rationale underlying the
19
provision of rest periods during the workday”]; Cicairos, supra,
133 Cal.App.4th at 963 [compensation plan that did not track
rest periods discouraged employees from taking rest breaks].)
Stoneledge also argues that Wage Order No. 7 cannot
require employers to pay commissioned employees (as opposed to
piece-rate employees) separately for rest periods because section
226.2, which requires employers to compensate piece-rate
employees for rest, recovery, and other nonproductive time, does
not apply to commissioned employees. Nothing in section 226.2,
however, suggests that the Legislature intended to adopt a
different rule for commission-based employees or to nullify the
plain language of Wage Order No. 7. (See Rodriguez, supra, 246
Cal.App.4th at p. 1034 [“‘[j]udicial construction that renders any
part of the wage order meaningless or inoperative should be
avoided”]; accord, Gonzales, supra, 215 Cal.App.4th at p. 43.)
Section 226.2 does not even mention commission-based
employees. Instead, the introductory paragraph of section 226.2
states, in relevant part: “This section shall apply for employees
who are compensated on a piece-rate basis for any work
performed during a pay period,” and “shall not be construed to
limit or alter minimum wage or overtime compensation
requirements, or the obligation to compensate employees for all
hours worked under any other statute or local ordinance.” (Italics
added.) Section 226.2 does not limit or alter the obligation of
employers to compensate commission-based employees “for all
hours worked,” including for rest periods. The fact the
Legislature “could have drafted [section 226.2] to include both . . .
piece-rate and commission plans,” as Stoneledge argues, indicates
nothing about the Legislature’s intent with regard to commission
plans, and we decline to imply any such intent. (See In re
20
Christian S. (1994) 7 Cal.4th 768, 776 [“‘an intention to legislate
by implication is not to be presumed’”]; Sabatasso v. Superior
Court (2008) 167 Cal.App.4th 791, 797 [“‘“[a]s a rule, courts
should not presume an intent to legislate by implication”’”].)10
D. Stoneledge’s Commission Agreement Did Not
Separately Compensate Sales Associates for Rest
Periods
Stoneledge contends that its commission plan complied
with California law by “counting as hours worked” the time sales
associates spent taking rest breaks and not deducting from wages
for those hours. These arguments misinterpret California law
and ignore how Stoneledge’s commission agreement worked.
We agree with Stoneledge that, under the commission
agreement in effect during the class period, the company did in
fact keep track of hours worked, including rest periods. We also
agree that the company treated “break time identically with
other work time.” The problem with Stoneledge’s compensation
system, however, is that the formula it used for determining
commissions did not include any component that directly
compensated sales associates for rest periods. Stoneledge merely
multiplied weekly “Delivered Sales” (less returns and credits) by
an applicable commission rate and paid that amount if it
10 We therefore deny Stoneledge’s motion for judicial notice of
various legislative and Department of Industrial Relations
materials regarding section 226.2 as not relevant to the appeal.
(See Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 544, fn. 4;
Newton-Enloe v. Horton (2011) 193 Cal.App.4th 1480, 1492,
fn. 3.) We grant its motion for judicial notice of the 2002 Update
of the DLSE Enforcement Policies and Interpretation Manual
(Revised), sections 2.5.1 and 2.5.4.
21
exceeded the minimum contractual rate. Like the compensation
plans courts have found unlawful for failing to pay for
nonproductive time, Stoneledge’s commission agreement did not
compensate for rest periods taken by sales associates who earned
a commission instead of the guaranteed minimum. (See Bluford,
supra, 216 Cal.App.4th at pp. 870, 872 [Safeway’s piece-rate plan
did not “directly compensate[ ] for rest periods,” “did not account
for rest periods or provide an ability to be paid for them,” and
“provided no means by which an employee could verify he was
paid for his rest periods”]; Gonzales, supra, 215 Cal.App.4th at
p. 50 [“if [an employee’s] piece-rate pay is allocated only to piece-
rate hours, he is not paid at all for his nonproductive hours”];
Ridgeway, supra, 107 F.Supp.3d at p. 1050 [compensation system
that “paid [for rest breaks] through activity pay for other tasks”
did not comply with California law]; Shook v. Indian River
Transp. Co. (E.D. Cal. 2014) 72 F.Supp.3d 1119, 1125, fn. 3
[“hours worked pursuant to a piece-rate system may not be used
as a credit toward rest breaks, which, like other hours worked,
must be separately compensated”]; Cardenas, supra, 796
F.Supp.2d at p. 1253 [“piece-rate formula” whose “components do
not calculate for the pre- and post-shift duties and breaks . . . did
not separately compensate employees for [this time] in violation
of California law”]; Ontiveros, supra, 2009 WL 425962 at pp. 2-3
[payment system that paid by the task failed to compensate for
nonproductive work such as rest breaks].) Sales associates who
were paid their commission received the same amount of
compensation regardless of whether they took rest breaks.
For sales associates whose commissions did not exceed the
minimum rate in a given week, the company clawed back (by
deducting from future paychecks) wages advanced to compensate
22
employees for hours worked, including rest periods. The
advances or draws against future commissions were not
compensation for rest periods because they were not
compensation at all. At best they were interest-free loans.
Stoneledge cites no authority for the proposition that a loan for
time spent resting is compensation for a rest period. To the
contrary, taking back money paid to the employee effectively
reduces either rest period compensation or the contractual
commission rate, both of which violate California law. (See § 221
[prohibiting employers from collecting or receiving from an
employee “any part of wages theretofore paid by said employer”];
§ 222 [prohibiting employers from withholding any part of a wage
agreed upon]; § 223 [prohibiting employers from “secretly
pay[ing] a lower wage while purporting to pay the wage
designated by statute or by contract”]; cf. Armenta, supra, 135
Cal.App.4th at p. 323 [averaging wages across pay periods to
satisfy minimum wage requirements “effectively reduces
[employees’] contractual hourly rate”].)
Thus, when Stoneledge paid an employee only a
commission, that commission did not account for rest periods.
When Stoneledge compensated an employee on an hourly basis
(including for rest periods), the company took back that
compensation in later pay periods. In neither situation was the
employee separately compensated for rest periods.
The table in Stoneledge’s commission agreement in effect
during the class period, provided again here for clarity,
illustrates these problems:
23
Week # Min. Weekly Advanced Gross Week Draw Cumulative
Weekly Pay Commission Pay (Owe) Draw (Owe)
1 $480.40 $300 $480.40 $180.40 $180.40
2 $480.40 $400 $480.40 $80.40 $260.80
3 $480.40 $550 $480.40 -$69.60 $191.20
4 $480.40 $800 (-$191.20 draw) $608.80 $0 $0
5 $480.40 $750 $750 $0 $0
A sales associate who works 40 hours in Week 1 but earns
only $300 in commissions is advanced an additional $180.40 to
bring that employee up to a minimum $12.01 per hour worked
(including rest periods). In Week 2 the sales associate improves
but still earns only $400 in commissions and the company must
advance another $80.40 from future commissions to ensure the
employee receives the guaranteed minimum. The draws paid in
Weeks 1 and 2 are sufficient to pay the sales associate $12.01 per
hour for 1.67 hours of authorized break time during each of those
weeks. When the sales associate finally earns commissions above
the guaranteed minimum in Weeks 3 and 4, however, Stoneledge
deducts the amounts advanced in Weeks 1 and 2 from gross pay
in Weeks 3 and 4. Thus, the draws paid in Weeks 1 and 2 are not
compensation to the employee (for rest periods or otherwise)
because the employee has to pay them back. When in Week 5 the
sales associate finally earns a full commission, it is impossible to
determine whether the sales associate is compensated for rest
periods and, if so, at what rate. The sales associate in Week 5
earns and is paid the same amount regardless of whether he or
she took a rest break during that week. (See Murphy v. Kenneth
Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1104 [“[i]f denied
two paid rest periods in an eight-hour work day, an employee
essentially performs 20 minutes of ‘free’ work, i.e., the employee
receives the same amount of compensation for working through
the rest periods that the employee would have received had he or
24
she been permitted to take the rest periods”]; accord, Augustus,
supra, 2 Cal.5th at p. 266.) Thus, Stoneledge’s contention that “a
Sales Associate at rest is earning at least $12 per hour” is only
true for sales associates who were never paid by commission.
That Stoneledge “accounted for” or “tracked” hours worked
including rest periods does not, without more, comply with
California law. (See Armenta, supra, 135 Cal.App.4th at p. 324
[compensation plan that paid plaintiffs weekly at an amount
exceeding the total hours worked multiplied by the minimum
wage did not pay minimum wage “for each hour worked” as
required by California law]; Perez, supra, 2015 WL 3604165at p. 3 [rejecting the argument that an employer may pay piece
rate employees for rest period time through their “total piece rate
earnings” so long as those earnings “average out to at least the
minimum wage”]; Balasanyan, supra, 294 F.R.D. at p. 554
[certifying class of plaintiffs alleging that a guaranteed minimum
draw per hour on future commissions did not adequately
compensate them for non-selling time]; Ontiveros, supra, 2009
WL 425962 at p. 2 [rejecting the argument that an employer may
pay piece rate employees for rest breaks and other non-piece rate
work “so long as the average hourly compensation for employees
does not fall below the minimum wage”].)
Our conclusion does not cast doubt on the legality of
commission-based compensation. Instead, we hold only that such
compensation plans must separately account and pay for rest
periods to comply with California law. Nor will our decision lead
to hoards of lazy sales associates. The commission agreement in
effect during the class period provided that a sales associate who
failed to meet minimum sales expectations (which generated
commissions well above the guaranteed minimum) was subject to
25
disciplinary measures up to and including termination. Thus,
employers like Stoneledge have methods to ensure that an
employee’s productivity does not suffer as a result of complying
with California law by paying a minimum wage for rest periods.
Because Stoneledge did not separately compensate sales
associates for rest periods as required by California law, the trial
court erred in granting summary adjudication on the plaintiffs’
cause of action for violation of section 226.7. The trial court’s
ruling that the plaintiffs’ other causes of action failed because the
section 226.7 claim failed was also erroneous. Because the trial
court did not address the merits of Stoneledge’s motion for
summary adjudication on the plaintiffs’ other causes of action,
the court on remand is to consider the remainder of Stoneledge’s
motion.
DISPOSITION
The judgment is reversed. The trial court is directed to
vacate its order granting Stoneledge’s motion for summary
judgment and to enter a new order denying Stoneledge’s motion
for summary judgment and Stoneledge’s motion for summary
adjudication on the cause of action for violation of section 226.7.
The trial court is also directed to rule on the merits of
26
Stoneledge’s motion for summary adjudication on the plaintiffs’
other causes of action. Plaintiffs are to recover their costs on
appeal.
SEGAL, J.
We concur:
PERLUSS, P. J.
KEENY, J.*
*Judge of the Los Angeles Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
27