Commissioned Employees: Cal. Sup. Ct. Holds Commissions Are Counted in the Pay Period Actually Paid

The California Supreme Court today issued its ruling in Peabody v. Time Warner Cable, Inc., Case No. S204804, __ Cal. 4th __ (July 14, 2014).  Plaintiff Peabody filed a class action suit alleging failure to pay overtime and other wage and hour claims.  As to overtime, Time Warner argued that Peabody fell within California’s “commissioned employee” exemption and was not entitled to overtime pay.  

At the request of the Ninth Circuit, the Court considered whether an employer may attribute commission wages paid in one pay period to other pay periods in order to satisfy the requirements of California’s commissioned sales exemption.  

The court concluded that it may not:

[A]n employer satisfies the minimum earnings prong of the commissioned employee exemption only in those pay periods in which it actually pays the required minimum earnings. An employer may not satisfy the prong by reassigning wages from a different pay period.

Id. at *9.  You can read more about the court’s reasoning here