Metropolitan News-Enterprise


Tuesday, July 15, 2014


Page 1


S.C. Rules for Employees in Minimum Wage Dispute

Justices Say Commissions Cannot Be Credited to Prior Pay Period


By a MetNews Staff Writer


An employer may not attribute commission wages paid in one pay period to other pay periods in order to satisfy California’s compensation requirements, the state Supreme Court ruled yesterday.

“[S]tatutes governing conditions of employment are to be construed broadly in favor of protecting employees,” Justice Carol Corrigan wrote for a unanimous court, ruling for plaintiff Susan Peabody,

Peabody was a Time Warner account executive from July 2008 to May 2009. Her duties included selling advertising on the company’s cable television channels.

Upon leaving Time Warner’s employ, Peabody filed a putative class action, alleging she often worked over 40 hours per week, without receiving overtime wages. She further alleged she occasionally worked more than 48 hours per week, and therefore was compensated less than the minimum wage for those weeks where she was paid only an hourly wage.

Also, due to Time Warner’s implementation of a new compensation plan in March 2009, Peabody alleged she was not paid all of the commission wages owed on her January and February 2009 sales.

Time Warner removed the matter to federal court and sought summary judgment.  Concerning commission wages, Time Warner argued that, under its compensation plan, an “account executive earned a commission only upon the occurrence of three events:  (1) procurement of the order; (2) broadcast of the advertising; and (3) collection of the revenue from the client.” 

Time Warner further contended that Peabody’s commissions for January and February 2009 sales were not earned until a collection of revenues occurred and were therefore subject to a new compensation plan.

As to the issue of overtime, Time Warner acknowledged that Peabody regularly worked 45 hours per week and was not paid overtime, because she was a commissioned employee and therefore fell within California’s “commissioned employee” exemption to overtime rules, and was not entitled to overtime compensation.  As to the issue of minimum wages, Time Warner argued that attributing commission wages to her salary resulted in Peabody actually earning an income higher than the applicable minimum wage.

The district judge granted summary judgment in favor of Time Warner, finding that the commissions involved were not earned, and thus not owed, until after the adoption of the new compensation plan.  The judge further concluded that Time Warner could attribute commission wages paid in one biweekly pay period to other pay periods for the purpose of satisfying California’s compensation requirements.

The Ninth Circuit affirmed as to the commission wages claim, but concluded that the “question of whether Peabody’s commissions can be allocated over the course of a month, or whether the commissions must only be counted toward the pay period in which the commissions were paid,” was an unresolved issue of state law and certified the question to the state high court. 

Corrigan, in concluding that the commissions had to be attributed to the pay period in which they were paid, cited an opinion of the Division of Labor Standards Enforcement. The agency had concluded that, for each workweek in the pay period, the earnings of the employee must exceed 1.5 times the minimum wage for each hour worked during the pay period.  

The justice noted that federal law allows employers to defer paying earned commissions so long as the employee is paid the minimum wage in each pay period. In light of these substantial differences from California law, reliance on federal authorities to construe state regulations would be misplaced, Corrigan said.

She concluded it is not permissible to defer any part of the wages due for one period until payment of the wages due for a later period. 

The case was argued in the Supreme Court by Brian F. Van Vleck of Van Vleck Turner & Zaller for Peabody and by Atlanta attorney Joseph W. Ozmer II for Time Warner.

The case is Peabody v. Time Warner, Inc., 14 S.O.S. 3598.


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