California Employee Rights Advocate : California Labor Attorney & Lawyer : Southern CA Employment Law : Los Angeles, Orange County : United Employees Law Group

ADT fired two commissioned salespeople because they filed a complaint with the Maryland Department of Labor claiming that they were owed overtime. In Randolph v. ADT Security Services, Inc., Judge Chasanow from the District Court of Maryland granted the plaintiffs and former ADT Security employees’ Motion for Summary Judgment as to liability against their former employer.

The complaint alleged a violation of the Fair Labor Standards Act (FLSA). During the DLLR proceedings the DLLR requested that the ADT employees produce alleged employer and client confidential information. ADT argued that the employees were lawfully terminated because they were not allowed to give out confidential information. And as such, the plaintiffs should not receive protection under the FLSA on the theory that confidential documents were included in the FLSA complaints.

To punish employees for complying with the DLLR’s instructions doesn’t seem fair. The court granted Summary Judgment in favor of the Plaintiffs, stating:

Perversely, ADT’s position would result in a situation wherein employees with the most supporting evidence would also face the greatest risk of dismissal. As a result, enforcement agencies would be less able to undertake early assessments of employees’ claims, as employees could not be expected to provide much evidence on their own (for fear of exposing themselves to termination). Employers would then have to face greater government intrusions into their business while the complaint was investigated; because of the lack of early information, these investigations would likely last longer. Meanwhile, employers would have an incentive to cull through every document attached to an FLSA complaint, looking for any violation of company policy in an effort to forestall expensive litigation.

More problematically, they could simply choose to impair the ability of employees to make claims at all by dubbing all possible supporting documentation “confidential.” Such a situation would grossly undermine enforcement of the FLSA, which hinges upon “information and complaints received from employees” (citation omitted). The FLSA anti-retaliation is about the free sharing of information

The court referred back to the definition of “complaint” and its use in standard civil litigation “embraces attached supporting documentation.” The court further ruled that cases in which the employees participate in an investigation, permits employees to disclose confidential information to investigators even when done unreasonably.

Finally the conclusion of the court:

ADT’s explicit admissions that Plaintiffs lost their jobs because of the filings with the DLLR mandate only one conclusion: ADT retaliated against Plaintiffs because they engaged in a protected activity. Summary judgment must therefore be granted for the Plaintiffs on count one of the complaint on the issue of liability.

There are three things you can take way for this case. One that retaliation laws would likely apply if you are fired for filing a complaint with the labor board or in the courts and two any information you have, proprietary or not may be used to prove your case. It’s important to save information that supports your claim for labor violations you may have suffered. If you are concerned that you may be owed unpaid wages for overtime it is advisable to contact a California labor law attorney to help you evaluate your rights.

If you have any questions about this article or our blog, feel free to call us at:
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Outside Salesperson Exemption

The Fair Labor Standards Act (or 29 USC § 213(a)(1) and 29 C.F.R. § 541.500.) defines the"Outside Salesperson Exemption." As a person that;

(a) has the primary duty of (a) making “sales” or (b) obtaining orders or contracts for services or facilities usage, and
(b) is customarily and regularly engaged away from the employer’s place of business in performing such primary duty.

It is also important to note that the employee must spend over 50% of their working time actively selling or obtaining new business away from the office and or home office, if applicable. As oppose to delivering product, giving product training or other administrative tasks unrelated to the actual sale of the product or services.

Inside Salesperson Exemption

The other second part of the salesperson exemption applies to primarily commission-based salespeople and is commonly referred to as inside salesperson exemption. Section 7(i) of the Fair Labor Standards Act (29 USC § 207[i]) will exempt a particular employee from overtime compensation if:

(a) the employee is employed in a “retail or service establishment,” and
(b) the employee’s regular rate of pay exceeds one and one-half times the applicable minimum wage, and
(c) more than half the employee’s compensation for a representative period represents commissions on goods or services.

“Regular rate of pay” referenced in the above federal test, applies on a work week basis. This means that the average of compensation for two or more weeks does not satisfy this requirement.

If you feel you are not being compensated properly for your work as a sales person please contact a California labor law attorney to discuss your case.
 

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If California labor law’s dictate you should be classified as a non-exempt employee,  in which you are entitled to overtime pay at 1 ½ to 2 times your straight time rate. And you are promised bonuses for reaching certain goals or you are entitled to commissions, then according to California labor law’s a special calculation must be made that increases your regular hourly overtime rate.   California wage law provides that when a non-exempt employee works hours in excess of eight in any workday or 40 in any workweek, employers must compensate the employee at 1 ½ to 2 times the employee’s regular rate of pay depending on the total number of hours worked. The “regular rate of pay” comprises more than just the employee’s hourly rate of pay it includes many different kinds of monetary remuneration an employee earns for his labor, including commissions and bonuses. 29 U.S.C. 207(e). 

When calculating the regular rate of pay, employers must follow specific rules depending on the type of income in question. Where an employee earns commissions or bonuses, the Department of Labor Standards Enforcement (“DLSE”)  uses the following rule to incorporate the additional compensation into the employee’s regular rate of pay:

“Compute the regular rate by dividing the total earnings for the week, including earnings during overtime hours, by the total hours worked during the week, including the overtime hours. For each overtime hour worked, the employee is entitled to an additional one-half the regular rate for hours requiring time and one-half and to an additional full rate for hours requiring double time.” DLSE Manual, Section 49.2.1.2 

For example, one type of incentive compensation may provide additional compensation if the store performs at a certain level. A company’s bonus plan could provide that a bonus will be paid to employees for increasing sales of specified products, increase profitability, improve customer handling and enhance quality of service. It could be referred to as an Incentive Program that requires employees to reach attendance goals to be eligible. The plan may also specify the payout schedule: eligible employees receive both quarterly and year end payouts. Another type of incentive may also pay certain hourly employees additional compensation, or a commission, for the sale of various products.

Employers must include these nondiscretionary bonuses along with other earnings to determine an employee’s regular rate on which overtime pay is computed. A bonus is “nondiscretionary” if the employer makes a promise to pay it based on the requirements being met. This includes bonuses designed to induce the employees to work more steadily, more rapidly or more efficiently, to remain with the employer, to meet attendance goals, individual or group production bonuses and bonuses for quality and accuracy of work. 29 C.F.R. 778.211(c). 

In any pay period in which a bonus has been earned the employer must recalculate the rate of pay upon which overtime for that pay period is calculated. The employer must add together all compensation earned for the workweek and then divide the compensation by the number of hours worked.


These Bonuses and Commissions Must be Timely Paid

Generally speaking, commissions and bonuses are due and payable after the employee did what was required and the amounts could reasonably be computed. Commissions are considered earned only after the happening of that event designated in the agreement with the employee so long as the event is reasonably tied to the calculation. DLSE Opinion Letter, 2002.12.09-2. 

If for example a commission is earned when the sale is made then that is the date from which all calculations are made.

Labor Code section 204 designates the time frame in which an employer must pay its employees. Wages earned by any person in any employment are due and payable twice during each calendar month, on days designated in advance by the employer as the regular paydays.

Section 204(b)(1) allows an employer additional time to pay commissions in the next pay period but only if it also itemizes the subsequent wage statement by including detailed information regarding the wages that it could not pay on time. Each wage component must be separately listed and specifically list the dates for which it is applicable.

The amount that an employee is short changed may not sound like a lot of money at first, when just looking at just a couple of pay periods. But the amount increases well into the tens of thousands of dollars when a claim includes up to four years of back wages plus interest and plus penalties.

Now you know.

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On July 6, 2010, the Second U.S. Circuit Court of Appeals held that sales representatives for Novartis Pharmaceuticals Corporation  are entitled to overtime pay under the Fair Labor Standards Act (FLSA).  Many California employees of Novartis claimed that they were wrongfully denied overtime pay between March 23, 2000 and April 7, 2007. The representatives, who worked nine-hour days, made routine calls and visits to physicians inquiring as to whether they would prescribe the company’s products to patients. Under the FLSA, employees must be paid overtime for more than 40 hours worked per week, but there are exemptions for “outside” salespersons  and “administrative” personnel.

The Court ruled that neither exemption applies to pharmaceutical reps because

(1) representatives only promote a product and do not make “sales”
(2) their activities are so tightly controlled by the company that they are not allowed to exercise independent judgment.

According to Secretary of Labor Hilda L. Solis,  an employee who can merely promote a drug and provide samples, has not in fact made a “sale.” Judge Kearse  agreed, stating that an employee who cannot “even obtain from the physician a binding agreement to prescribe it” has not made a sale.  
Novartis contended that its representatives are exempt from overtime under the “administrative” exemption, because they are free to determine when they will visit a particular doctor and how best to earn their support, whether it be dinner, a sporting event, or some other activity. The Court rejected this argument because it failed to establish a freedom of discretion. It particularly noted that Novartis representatives have no control over the company’s marketing strategy. Furthermore, the company determines the physicians to be visited, the drugs to be recommended, and the promotional events to be held. 

The ruling in this case is important because it is the first federal appellate decision addressing the outside sales and administrative exemptions as it applies to the pharmaceutical industry.  
It also underlines the main purpose of California overtime law, which is to evenly divide work among employees. 
If you are a pharmaceutical representative and have questions regarding your entitlement to California overtime pay, take action and call a knowledgeable California labor law attorney.

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A former sales representative claims he is owed $30,000 in commissions. His California labor law attorney has filed suit in San Francisco alleging this computer manufacturing giant denied three former salespeople thousands of dollars in commissions. The plaintiffs are seeking to represent all salespeople employed by the company who have not received their commission payment or bonuses. According to Bloomberg this could be at least 50,000 current and former employees. The company claims this loss may have been caused due to a malfunction in their order-management system and that around 2,000 out of 23,000 personnel from its global sales team were affected by the glitch

Oftentimes, sales people rely heavily on their commission and are generally classified as exempt employees or not entitled to overtime pay. However, it’s important to understand that in order to be classified as exempt, among other things; you must be actively selling at least 50% of the time. Whether you are an Inside Salesperson or Outside Salesperson, California laws strictly regulate salesperson commissions.

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