242 | 2024 Cal-Peculiarities ©2024 Seyfarth Shaw LLP www.seyfarth.com for all rest breaks during the week, even if the employee performed no piece work on a given day. This guidance arguably deviates from the intent of the statute, because on days where the employee performs no piece-rate work, there should be no need to have rest breaks paid at a higher hourly rate. Commissions are (mostly) not “piece-rates.” The DLSE Fact Sheet offers some comfort to employers by clarifying that the new law does not apply to commissioned employees. But the DLSE warns that some payments labelled as “commissions” may actually be piece-rates, such as where the employee receiving “commissions” is not principally involved in selling the product or service or where the payment is not calculated as a percentage of the product or service sold. In addition, the DLSE further notes that the California Court of Appeal has found similar rest break compensation requirements to apply to commission-earning employees (“[N]ote that while section 226.2 applies only to piece-rate employees, the court in Vaquero v. Stoneledge Furniture LLC, 9 Cal.App.5th 98 (2017), found that similar pay requirements apply to commission employees, including the right to be compensated separately for required rest breaks.”) See also § 7.15. Another “regular rate” trap for the unwary. The DLSE Fact Sheet creates a potential pitfall on how to calculate the “total compensation” for the workweek. The DLSE advises that all “remuneration” included in calculating the regular rate of pay for purposes of overtime premium pay (e.g., the value of meals, lodging, and other non-monetary remuneration) should also be included in determining the total compensation and average hourly rest-break rate for piece-rate employees. The DLSE thus added a further layer of complication for employers that had hoped to look only to the total hourly and piece-rate pay in determining the average hourly rest break rate. Employers may, however, exclude payments that are not included in the regular rate of pay, such as vacation payments, gifts, and travel expenses. Rest period time need not be separately tracked. Providing some relief to employers from the potential burdens of this law, the DLSE advises that employers need not separately track actual rest break time taken by piece-rate employees. Instead, employers must pay for all compensable (legally required) rest breaks at the specified rate, and record these minutes on the wage statement. The employer need not record the actual number of minutes employees take for rest breaks or report those minutes on wage statements. 7.15 Payment of Commissions Employees earn commissions in accordance with the level of products or services that they sell. Employees who earn more than 1.5 times the minimum wage and whose total pay consists mostly of commissions are exempt from California overtime requirements. (See § 7.7.5.) Nonexempt employees paid on commission must receive, through a draw against commissions or otherwise, at least the minimum wage for all hours worked in each pay period. And the Court of Appeal has held that these employees must also be paid separately, at the minimum wage, for the time spent on rest breaks.386 7.15.1 What payments qualify as commissions? To qualify as receiving “commission” wages, the employee must be involved principally in sales activities (not on product creation or rendering service), and the compensation must depend on the level of sales.387 The DLSE has defined commissions narrowly, as wages paid based on a percentage of the sale, and argues that wages paid for the number of units is really a piece-rate, not a commission rate.388 But the Court of Appeal has rejected this narrow interpretation in the context of a pay plan for car salespersons.389 At issue was a Labor Code provision stating that commissions for employees of licensed vehicle dealers consist of “compensation paid to any person
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