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New Court Decision – Commissioned Employee Exception

Posted on July 14, 2014

The Supreme Court of California just ruled on a case at the request of the United States Court of Appeals for the Ninth Circuit.

Peabody v. Time Warner should be reviewed by any employer who maintain a sales force that is compensated hourly near the minimum hourly wage and who’s employees are are paid commissions on a monthly basis.

The facts as reported are that from July 2008 to May 15, 2009, Peabody was a Time Warner account
executive selling advertising on the company‟s cable television channels. Every other week, Time Warner paid $769.23 in hourly wages, the equivalent of $9.61 per hour, assuming a 40-hour workweek. About every other pay period, Time Warner paid commission wages under its account executive compensation plan.

Time Warner argued that commissions should be reassigned from the biweekly pay periods in which they were paid to earlier pay periods. It reasoned that the commissions should be attributed to the “monthly pay period for which they were earned.”  Attributing the commission wages in this manner would satisfy the exemption‟s minimum earnings prong that requires a minimum hourly rate of $12.00 per hour.

The court concluded it may not do so. Whether the minimum earnings prong is satisfied depends on the amount of wages actually paid in a pay period. An employer may not attribute wages paid in one pay period to a prior pay period to cure a shortfall.