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Vaquero v. Stoneledge Furniture LLC

California Court of Appeals, Second District, Seventh Division

February 28, 2017

RICARDO BERMUDEZ VAQUERO et al., Plaintiffs and Appellants,
v.
STONELEDGE FURNITURE LLC, Defendant and Respondent.

          Order Filed Date March 20, 2017

         APPEAL from a judgment of the Superior Court of Los Angeles County, No. BC522676 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.

         ORDER MODIFYING OPINION

         The opinion filed February 28, 2017 and is modified as follows:

         1. On page 14, in the first paragraph, after the first full sentence ending with the words “minimum hourly wage for such time, ” add as footnote 8 the following, which will require renumbering subsequent footnotes:

         8 This case does not involve, and we have no occasion to question, the propriety of compensation plans that pay non-exempt employees a salary that compensates them for rest periods and other non-productive work time.

         2. On page 15, in the second sentence of the first full paragraph, on lines 7 and 8, the words “separately account” are deleted and replaced with the words “provide compensation.” As modified, the sentence reads:

         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 provide compensation for rest breaks and other nonproductive time.

         This order does not change the judgment.

          SEGAL, J.

         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 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 Pay

Weekly Advanced Commission

Gross Pay

Week Draw (Owe)

Cumulative 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' 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 226.7[1] 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 ...


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