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Leena Areso v. Carmax

May 20, 2011


APPEAL from a judgment of the Superior Court of Los Angeles County, William F. Highberger, Judge. (Los Angeles County Super. Ct. No. BC391477)

The opinion of the court was delivered by: Johnson, J.



Leena Areso appeals from the trial court's grant of summary adjudication in favor of CarMax, Inc. (CarMax) in her class action lawsuit, which (among other causes of action) alleged violations of the Labor Code, including a failure to pay compensation for overtime. We affirm.


Areso began working for CarMax on June 23, 2004 as a sales consultant trainee, and until July 18, 2004 she was classified as an hourly employee and was eligible for overtime pay.*fn1 On July 19, 2004, CarMax promoted Areso to sales consultant, with the primary job of selling CarMax's used vehicles, warranty plans, used vehicle appraisals, and vehicle accessories. CarMax classified Areso and other California sales consultants as "commissioned exempt salespersons." Areso received payments based on the products and services she sold, with a minimum guaranteed base pay, but Areso was not paid overtime. Areso worked for CarMax until June 7, 2005.

Until February 1, 2005, CarMax paid Areso and other sales consultants under its National Pay Plan, which included a uniform dollar payment for each sale of a vehicle, lease, appraisal purchase (purchasing a used vehicle from a customer), and extended service plan. The uniform payment for the sale of a vehicle was $150.*fn2

Sales consultants also were paid 10 percent of the purchase price for any accessories sold. CarMax adopted the $150 payment to avoid an incentive for its sales staff to push higher-priced items to maximize their own commissions.

In 2005, CarMax implemented a new pay plan for its sales consultants in California.*fn3 Under the California Pay Plan, CarMax paid Areso and other sales consultants pursuant to a formula which took into account the number of vehicles sold by a sales consultant (the "level") and the average price of the vehicles or other products sold, decreasing the percentage paid to the sales consultant as the average sale price increased, and providing for an adjustment if the base payment totaled less than the "target commissions." After these calculations, a sales consultant would earn the same uniform payment per vehicle, approximately $154, whether the average sale price of the vehicle sold was $40,000, $20,000, or $9,999.99. The sales consultants continued to receive the same percentage (10 percent) of the purchase price of any accessories sold. Like the National Plan, the California Plan was designed to avoid an incentive for sales consultants to push higher-priced items.

Areso was a named plaintiff in a class action lawsuit filed on July 10, 2008 against CarMax, alleging that CarMax failed to pay overtime in violation of Labor Code section 1194, along with other allegations of violations of the Labor Code and the Business and Professions Code. CarMax filed a motion for summary adjudication, arguing that Areso's compensation under both the National Pay Plan and the California Pay Plan included payments which qualified under the "commissioned sales" exemption from the overtime pay requirement. Areso had undisputably earned more than one-and-a-half times the minimum wage, and had received at least one half of her wages in "commissions," making her ineligible for overtime pay.

The trial court granted the motion for summary adjudication.*fn4

The court stated: "There is no material issue of fact under either pay plan that the employer paid the sales consultants either exactly $150 per vehicle sold (under the National Plan) or approximately $150 per vehicle sold (under the California Plan)." The court concluded that CarMax's compensation arrangement "is still a performance-based incentive system and thus fairly understood to be a commission structure" under Labor Code section 204.1.*fn5 The trial court also concluded that the $150 or $154 received by Areso for each vehicle, regardless of the price, was a "commission" under section 204.1 based on the "amount" rather than the "value" of vehicles sold, construing "amount" to mean the number of vehicles Areso sold.

The trial court entered judgment in favor of CarMax on Areso's first cause of action, the overtime claim, ordered that the second cause of action be dismissed with prejudice, and dismissed without prejudice ...

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