Peabody v. Time Warner Cable: Employer May Not Average Commission Wages Across a Monthly Pay Period and Must Apply Such Wages to the Pay Period in Which They Are Actually Paid

Susan Peabody filed suit against Time Warner Cable (TWC), alleging, in part: As an account executive for TWC, she worked an average of 45 hours per week and earned salary plus commissions based on her monthly sales; TWC paid her salary biweekly and paid commissions monthly; in those pay periods that included a commission payment, TWC paid Ms. Peabody more than one and one-half times the minimum wage; in those pay periods that did not include a commission payment, TWC paid Ms. Peabody less than one and one-half times the minimum wage, such that she did not qualify for the commissioned sales exemption.

The district court granted summary judgment for TWC, and Ms. Peabody appealed. The Ninth Circuit affirmed in part (as to a question not at issue here) and asked the California Supreme Court to decide the following question: whether an employer can average an employee’s commission payments over certain pay periods to satisfy the compensation requirements of California commission sales exemption. 

In its decision yesterday, the Supreme Court answered the question in the negative, holding as follows: 

Labor Code section 204 requires employers to pay wages no less than semimonthly, and Time Warner could not apply commission wages to a monthly, rather than semimonthly, pay period. Slip op. at 5-7. 

The commission sales exemption depends on the amount of wages actually paid in a given pay period, and Time Warner could not attribute the commission wages paid in one pay period to an earlier pay period. Slip op. at 7-9. 

The federal Fair Labor Standards Act's exemption for commissioned employees is not analogous to California law because the FLSA does not require employers to pay employees no less than semimonthly. Slip op. at 9. 

Peabody v. Time Warner Cable (7/14/14) --- Cal.4th ---, is available here.