Areso v. CarMax, Inc.: Court of Appeal Issues Surprising Commission Decision

In Areso v. CarMax (5/20/11) --- Cal.App.4th ----, 2011 WL 1902200, plaintiff sold cars for defendant. Defendant classified plaintiff as an exempt commissioned salesperson. Defendant paid plaintiff a minimum guaranteed base, plus approximately $150 for each vehicle sold, but did not pay her overtime compensation. Plaintiff filed a class action, challenging defendant's pay practices. The trial court (Los Angeles Superior, Judge Highberger), granted summary judgment for defendant, holding that plaintiff was properly classified as exempt. The Court of Appeal affirmed.

First, it held that, although the order granting summary judgment did not dispose of all causes of action, plaintiff could appeal because the remaining causes of action (waiting time penalties, unfair competition, and PAGA penalties) were "purely ancillary" in that they "all depend entirely upon Areso's overtime claim, and therefore all became moot once the trial court granted summary adjudication on that claim." Slip op. at 5.

Second, it held that defendant's payments to plaintiff of $150 per vehicle constitute commission wages "based proportionately on the amount or value" of defendant's property or services sold, making plaintiff an exempt employee. Slip op. at 6-7.

The Court distinguished Keyes Motors, Inc. v. DLSE (1987) 197 Cal.App.3d 557, which held:

Labor Code section 204.1 sets up two requirements, both of which must be met before a compensation scheme is deemed to constitute commission wages. 'First, the employees must be involved principally in selling a product or service, not making the product or rendering the service. Second, the amount of their compensation must be a percent of the price of the product or service.'

Keyes at 563; see also Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, 804 (adopting Keyes). Contrary to Keyes and Ramirez, the Court held that "commission wages may be based proportionately on the amount (number) of property or services sold by the employee." Slip op. at 11. In other words, defendant's compensation structure of $150 per car was based on the amount of product sold and constituted a commission.  

The opinion is available here.