In Steinhebel v. Los Angeles Times Communications, a California Court of Appeal recently held that an employer may legally charge back advanced commissions in the event agreed upon conditions are not satisfied.
In this case, the plaintiffs, former telesales employees for the Los Ange les Times, entered into a written agreement controlling the payment of the employees' commissions. The employees earned an hourly base pay at the statutory minimum wage and earned commissions from the sale of newspaper subscriptions. The written agreement provided in part that although commissions on subscription sales were advanced to the employees, the commissions on the sales were subject to a chargeback against future commissions in the event the customer did not keep the subscription for at least twenty-eight (28) days.
The employees filed a complaint seeking relief under various California Labor Code provisions including: Section 203 (waiting time penalties); Section 221 (collection or receipt of wages previously paid); Section 225 (unlawful receipt or withholding of wages and secret payment of wage below scale); Sections 400 through 410 (restrictions on employee bonds); and Business and Professions Code Section 17200 (unfair competition).
The Court affirmed that an employer may legally advance commissions to its employees prior to the completion of all conditions for payment and, by agreement, charge back any excess advance over the commissions earned against any future advance should the conditions not be satisfied. The Court determined that the twenty-eight (28) day requirement was a condition precedent to the employees' entitlement to the commission. Accordingly, the advances did not constitute earned wages because all the conditions for performance had not been satisfied. The chargeback procedure merely reconciled unearned commissions by reducing the amount of the next advance to the employee. The Court also took into account the fact that the employees always received their full hourly statutory minimum wage regardless of the net level of sales during a particular period, and the employees expressly authorized the chargeback of commissions pursuant to written agreements.
Employers should consult with their labor counsel when implementing a policy to charge back advanced commissions to sales employees.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Please join Sheppard Mullin for an engaging dual panel event focusing on the current state of the augmented and virtual reality industries. While often mentioned interchangeably, AR and VR are marked by their own distinctive characteristics and uses.
Each of our panels will consist of a cross-section of experts and will focus on the business trends and challenges, investment opportunities, and the legal landscape of the separate AR and VR worlds. The panelists will share their diverse insights on the current climate and future of AR and VR, and discuss how their businesses bear on each arena and the various issues they face.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).