Perhaps one of the most misunderstood and improperly applied issues in California is how to treat commissioned sales people. Here are some of the most common mistakes I’ve encountered that can create substantial liability for employers.

Mistake: Treating all commissioned sales people as exempt employees (i.e. paying them a straight salary). 

Usually there are two exemptions that sales people could qualify for: outside sales exemption or inside sales exemption under California law. If the employee meets one of these exemptions, it only means the employee is not entitled to overtime pay – all other wage and hour laws still apply. 

Outside Sales Exemption

To qualify for the outside sales exemption, as the name implies, the employee must work outside of the office for more than 50% of their working time. 

Inside Sales Exemption

To qualify for the inside sales exemption, the employee must (1) earn more than one-and-one-half times the minimum wage (as of November 2008 the minimum wage is $8.00/hr in California) and (2) more than one-half of the employee’s compensation is from commissions. Employers have to be careful because there is no equivalent exemption to the inside sales exemption under Federal law –and even though an employee may qualify to be exempt under California law for overtime, they still may have to pay overtime under Federal law. 

It is possible that the employee may qualify for another exemption, such as professional, administrative, or executive, but the two exemptions discuss above most often apply to sales personnel.

Mistake: Making illegal deductions from the employee’s pay for orders that were cancelled.

There have been several court decisions that significantly restrict an employer’s ability to take an offset against an employee’s wages.  Cases have held that employers may not make deductions from employees’ commissions when the customer returns the sold items under certain circumstances. Also, another case held that the requirement that the employee make a “balloon payment” for the entire remaining balance of outstanding loan owed to the employer when the employee leaves employment is an unlawful deduction – even where the employee authorized such payment in writing. Finally, another case held that it was unlawful for employers to deduct from an employee’s current payroll for past salary advances that were in error. As these cases illustrate, employers need to be very careful when deducting from an employee’s pay. Even though the deduction may seem innocent, it could possibly violate California law.

Below is my Slideshare.net slide show on my previous post about the top 10 stupidest ideas California employers could have:

Lorraine Henderson, the director of the Port of Boston, was charged with hiring illegal immigrants to clean her home. "She’s supposed to be deporting aliens, not hiring them," said Assistant US Attorney Brian T. Kelly, chief of the public corruption unit.

The housecleaner wore a wire during conversations with Henderson. The article reports that Henderson counseled the housekeeper about how to avoid being caught:

"You have to be careful ’cause they will deport you. Be careful," Henderson told the housekeeper in a conversation Sept. 9, 2008, that was recorded on the wire. "Wow, wow, if you leave they won’t let you back … you can’t leave, don’t leave … ’cause once you leave you will never be back."

Not sure which category to post this entry under – but thought it was worth a laugh.
 

 

 Today marks the official introduction of the California Employment Law Report.

Why start another blog about California employment law? I’ve been continually blogging about California employment law since about the middle of 2005 in various forms. This blog is my “excuse” to keep up-to-date, think about law in different creative ways that sometimes practicing does now allow for, and to keep the practice of employment law fun. Yes, I said fun. For lawyers out there who are burnt-out on the practice of law, and who are ready to turn to a new profession, I recommend that you start your own law firm and a blog. As my own boss, I can now see how rewarding the practice of law truly is, and it took having to not worry about whether I am an hour or two short on my billables or stuck litigating a strategy I do not believe is the best for the client. I hope that this independent voice will come through on this blog, and will add to the discussion about California employment law. 

The technology that allows for blogs is quickly changing our world. This is very similar to (if not to a greater extent) the changes the printing press had on society. I cannot state the importance of the Internet’s role in almost every aspect of life today. The Internet has changed, and will continue to change, the practice of law and lawyers need to keep up. There are a few still out there trying to fight this change, but it is all too apparent that we live in a new world (and have been living in it for some time now). In addition to employment law, this blog will also focus on how technology affects the employer-employee relationship and the practice of employment law from a litigation perspective. 

Adapting to these great developments in technology, I am conducting webinars on new developments in employment law, and will occasionally post the audio of the webinars here. I also will post my podcasts, which can be subscribed to through iTunes. I can also be followed on Twitter at @Anthonyzaller. I am sure there will be many new ways I will be able to communicate with anyone who is interested in the near future – and I will try my best to keep up. 

I am looking forward to the discussion…

 

I recently conducted a webinar on new developments involving meal and rest breaks, expense reimbursement, paid time off pitfalls, and other wage and hour issues California employers should be aware of.  It is approximately 30 minutes.  Click here to download, or click here to listen via iTunes.