Wages & Hours

Zoom and the Inside Sales Exemption

The Coronavirus pandemic is forcing rapid change on the way we work and some of those changes might stick.  Zoom meetings, for example, are replacing business trips while travel is restricted.   But will the convenience and efficiency of online meetings reduce business travel once the restrictions are lifted? Why travel to see prospects when you can meet them online for a fraction of the cost?  If this becomes a lasting change in business behavior, it could have serious legal implications for sales teams.           The Distinction Between Inside and Outside Sales in California In California, there is an important legal difference between inside and outside salespeople. Inside salespeople have more rights than outside salespeople. Namely, inside salespeople are entitled to meal and rest breaks and, in some cases, overtime pay. Outside salespeople, on the other hand, are not entitled to breaks or overtime pay. Companies are required to properly classify salespeople so they know who is entitled to and breaks and overtime. Misclassification of salespeople can be costly because there are steep penalties for missing breaks and failing to pay overtime As sales teams reduce travel, they may need to be reclassified from outside sales to inside sales.  This is because the classification system is based on travel frequency.  The defining characteristic of an outside salesperson is travel. Those who spend more than 50% of their time traveling outside of the office are classified as outside sales.   Those who don’t travel much and spend most of their time working from the office are inside sales.   If salespeople conduct more business online and travel less, their classification can change from outside sales to inside. Contact Us Schedule your free consultation. Inside Salespeople are Always Entitled to Meal & Rest Breaks All inside salespeople are always entitled to meal and rest breaks. There are no exceptions.  When rest breaks and meal periods are not provided as required, employees may recover penalty payments from employers of up to two hours of play per day for missed meal periods and rest breaks (one hour for each missed break).  United Parcel Service, Inc. v. Superior Court of Los Angeles County, 192 Cal.App.4th 1043 (2011). Outside salespeople are not entitled to meal and rest breaks. Inside Salespeople and Overtime Pay Inside salespeople are also entitled to overtime pay. But the right to overtime pay is a moving target and difficult to track. As explained below, a salesperson’s right to overtime pay can vary each quarter and each pay period. Here is the rule: inside salespeople are entitled to overtime pay, unless more than half of their pay comes from commissions and their earnings exceed one and one-half times the minimum wage.  Each part of this rule is discussed below. The 50% Commission Rule Applies Quarterly As explained above, a salesperson is entitled to overtime pay unless commissions make up 50% or more of their total compensation. This rule is not applied annually. Instead, it must be measured during the “representative period.” Since most sales organizations operate on a quarterly cycle, the period is typically a quarter. Therefore, a salesperson’s total compensation must be measured each quarter. If commissions make up less than half of their total compensation for the quarter, the salesperson is entitled to overtime pay. A salesperson’s right to overtime pay can vary quarter to quarter. During a good quarter with high commissions, a salesperson might not be entitled to overtime. But during a slower quarter, they might be entitled to overtime pay. The Minimum Wage Test Must be Calculated each Pay Period A salesperson must be paid overtime for each pay period that their total earnings do not exceed 1.5 times the minimum wage. This is true even if commissions account for more than 50% of their compensation. And, in California, commission payments cannot be carried over to other pay periods. Each pay period is analyzed separately and the right to overtime pay can vary each pay period. As a result, employers must essentially run the overtime exemption test anew for each pay period to determine whether or not a particular employee is overtime-eligible or -exempt, based on the earnings for that pay period.  Employers must also maintain diligent, accurate timekeeping records for any insides sales employees for whom they wish to claim the California overtime exemption.  Anytime requirements for the exemption are not met in a workweek, the employer must ensure the employee is paid appropriately for any overtime worked. Failure by employers to properly classify inside salespeople can also have other costly repercussions.  For example, there are requirements for employers to pay all overtime due prior to an employee’s last day of employment.  Failure to do so can result in “waiting time penalties” if the failure is willful.  Employers must also itemize paystubs for non-exempt employees, showing the number of hours worked by the employee during the pay period.  California Labor Code §226(a).  If an employer has misclassified an inside salesperson as exempt when they shouldn’t have, they may also have failed to properly itemize the employee’s hours on their pay stub.  Employees who have been misclassified by an employer may also recover attorney’s fees in many cases. The Impact of More Zoom Meetings and Less Travel As you can see, a company is required to treat inside salespeople much differently than outside salespeople. It’s very possible that thousands of outside salespeople are now actually inside salespeople. If they are conducting meetings online instead of traveling, they might be entitled to meal and rest breaks and overtime pay. But companies are just trying to survive the pandemic and possibly unaware that their sales teams now are entitled to breaks and overtime pay. A wave of Zoom misclassification lawsuits may be on the horizon.

Continue Reading
Employment Law Blog

California Commission Disputes

Commission disputes are all too common in California.  The threshold question in most of these cases is do the commissions at issue constitute earned wages under the California Labor Code? What is a “Commission”?  In order to answer this question, let’s first look at what counts as a “commission” under California law. Section 204.1 of the California Labor Code states, “Commission wages are compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.” Section 2751 specifies that “commissions” do not include the following:  “(1) Short-term productivity bonuses such as are paid to retail clerks.  (2) Temporary, variable incentive payments that increase, but do not decrease, payment under the written contract.  (3) Bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.” When is a Commission “Earned”?  Determining when a commission is earned is often critical for executives who have left their employer with outstanding commissions.   If the commission is deemed earned at the time they leave the company, they most likely have the legal right to the commission.  If the commission was not earned at the time of their departure then they will forfeit the payment. According to California law, classifying a commission as “earned” is a matter of contract between employer and employee. In Koehl v. Verio, the court held, “A commission is ‘earned’ when the employee has perfected the right to payment; that is, when all of the legal conditions precedent have been met. Such conditions precedent are a matter of contract between the employer and the employee…” Likewise, Sciborski v. Pacific Bell Directory states clearly that once the contractual obligations are fulfilled, the commission is considered a wage: “[O]nce the express contractual conditions are satisfied, the commission is considered a wage.”  The courts have traditionally deferred to the language of the contract in determining when a commission is “earned” – for example, courts have held that employers are legally allowed to require customers to submit payment before a salesperson “earns” the commission in question. Thus, once employees fulfill their contractual obligations, their commissions are typically deemed “earned.” And once commissions are “earned,” they are protected by the California Labor Code. In fact, California courts have held that section 221 of the Labor Code prohibits an employer “from collecting or receiving wages that have already been earned by performance of agreed-upon requirements.” Thus, once an employee fulfills all its contractual requirements, thereby earning the commission, an employer is required to pay the commission to the employee.    Retroactive Commission Changes  Some companies attempt to alter an employee’s commission after a deal has been closed.  This normally occurs after a commissioned sales employee closes an unusually large transaction.  Is it legal to lower the commission after the employee has done the work?   The answer is not always clear. While courts generally give deference to the language of the contract, courts have also refused to allow employers to apply changes to commission plans retroactively. In Mathews v. Orion Healthcorp Inc., the court for the northern district of California held that “Although the commission plans contained a clause reserving to Defendant the right to unilaterally change the plans, such a clause is contrary to California law if applied retroactively.” To come to its conclusion, Matthews cited a previous case that dealt with changes to a commission plan, Asmus v. Pacific Bell.  In Asmus, the court relied on contract theory, specifically the notion of a contract as “illusory,” to arrive at its ruling. The Asmus court held that “an unqualified right to modify or terminate the contract is not enforceable. But the fact that one party reserves the implied power to terminate or modify a unilateral contract is not fatal to its enforcement if the exercise of power is subject to limitations, such as fairness and reasonable notice.” Citing this section from Asmus, the Mathews court held that “Defendant’s reserved right to modify the commission plan could not extend to past earned commissions under California law, and there is no dispute of fact that Plaintiff satisfied the conditions precedent to qualify for the commissions due to be paid.”   The point here is that the terms of a commission plan will govern unless the agreement gives the company the unfettered right to make retroactive unilateral changes.     Pfeister and Vinson: Are Commissions Plans Enforceable Contracts?  As the rulings in Asmus and Mathews demonstrate, the courts have generally refused to allow employers to modify commissions plans retroactively. In order to deny employers this right, the courts started from the position that the incentive commission plans it dealt with were enforceable contracts. However, there has been a thread of subsequent cases pushing back on this conception of incentive plans. In such cases, courts have interpreted commission plans between employer and employee not as a matter of enforceable contract at all. Therefore, employers in these cases were not required to pay employees commissions according to the terms of the incentive plans.  In Pfeister v. Int’l Bus Machs. Corp, Plaintiff worked for IBM and had a dispute over Q4 commissions earnings. IBM originally set Plaintiff’s Q4 signings quota to approximately $2.8 million. IBM then increased this quota to $10 million in February of the following quarter. When applied to Plaintiff’s Q4 sales, this retroactive change had the effect of reducing his commissions by nearly $400,000. In this case, the court denied Plaintiff’s claim for breach of contract on the grounds that the incentive plan was not an enforceable contract. To reach this position, the court discussed two principles characterizing an enforceable contract: (1) Mutual assent or consent of the parties to enter into a contract; and (2) sufficiently definite terms. Regarding (1) mutual consent of the parties, the Pfeister court held that, because the incentive plan stated it “does not constitute an express or implied contract or a promise by IBM to make any distributions under it,” IBM did not consent to form a contract with Plaintiff.  Likewise, regarding (2) sufficiently definite terms, the court stated that, because the incentive plan granted IBM the right “in its sole discretion to change sales performance objectives…[and] the right of IBM in its sole discretion to adjust the incentive payment,” the incentive plan did not contain sufficiently definite terms. Because the incentive plan contained neither (1) mutual consent of the parties or (2) sufficiently definite terms, the court did not recognize the incentive plan as an enforceable contract.   In refusing to recognize Plaintiff’s incentive plan as an enforceable contract, the Pfeister court dismissed Pfeister’s breach of contract claim.  In Vinson v. Int’l Bus Machs. Corp, a 2019 commission dispute again involving IBM, the court similarly sided with IBM. Like Pfeister, the Vinson court again held that the incentive plan in place did not constitute an enforceable contract, because IBM reserved the right to change the plan’s features and modify or cancel the plan. Conclusion  As discussed previously, once a commission is considered “earned,” this triggers wage protections under California law. As cases like Koehl and Sciborski demonstrate, determining when a commission is “earned” is typically a matter of contract between employee and employer. While the courts generally defer to the language of the contract in deciding when a commission is earned, the Mathews court offered some protection to employees.  Mathews relied on contract law principles cited in Asmus to deny employers the unrestricted right to apply changes to commission plans retroactively.     But some commission plans, such […]

Continue Reading
Employment Law Blog

Why Companies Steal Money from their Employees

More money is stolen each year through wage theft than all other crimes combined.   Approximately 135 $Billion.  Low wage workers are hit hardest as they on average lost about one-third of their earnings each year to wage theft.   Hi, I’m Robert Ottinger. I’m an employment lawyer with the Ottinger Firm, and we represent executives and employees. Every year, $15 billion is stolen through wage theft. Wage theft is the single biggest property crime in America. More is stolen through wage theft than other property crimes like robbery and burglary combined. Most of the victims of wage theft are low-income workers, and most low-income workers in America lose about one-third of the earnings every year through wage theft. This is a big problem in America, but it doesn’t get much coverage in the media. But yesterday, a reporter called me and wanted to know why, in my opinion, wage theft was such a big problem. Well, I told her the answer was simple. The system is rigged in favor the employer. Here’s how it’s rigged. Most property crimes like robbery and burglary are crimes. If you steal someone’s ring, if you steal their car, and you get caught, good chance you’re going to go to jail or be punished harshly. However, if a company steals a person’s wages, they’re not going to go to jail. When was the last time you ever heard of a person going to jail for wage theft? It never happens. So that’s the main reason, in my opinion, why wage theft remains such a huge problem because it’s theft. If you steal someone’s wages, it’s just like stealing money out of their pocket. There’s really no difference, but for some reason, it isn’t a crime in America, and that’s why companies continue to do it. The second reason is that the government agency that’s supposed to protect workers from wage theft is called the Department of Labor, but that department is really kind of a joke, and that’s because there aren’t enough people working there to protect the American workforce. In fact, the numbers are kind of startling. Did you know that 70 years ago the Department of Labor had 1,000 people out there trying to enforce the wage laws? And back then, 70 years ago, there were 22 million workers. But today, 70 years later, the workforce has grown to 135 million workers. But guess what? There’s still only 1,000 people working for the Department of Labor trying to protect workers. So that’s really the main reason. The Department of Labor is a joke. It doesn’t have anywhere near the amount of people it needs to help protect the American worker. Hopefully, someday soon, our country will realize this is a big problem and make the changes necessary to help the American workforce. I’m Robert Ottinger. If you have any comments, if you disagree with this, any suggestions, I’d love to hear your comments. Just let me know in the comments below or send me an email. Thank you.

Continue Reading
Employment Law Blog

Business Expense Reimbursement for San Francisco Employees

Many San Francisco employees are required to commute between two or more work sites during the day.  This obligation raises several important issues that San Francisco employees should be aware of.  First, San Francisco employees are entitled to be reimbursed for all work related out-of-pocket expenses, such as travel related expenses, cell phone charges, meal and entertainment expenses, and tools.  These business expenses must be reimbursed if they are paid by the employee and are incurred in order to perform the employee’s job duties. Second, San Francisco employees are entitled to be paid for the time they spend commuting between work sites. If you are being forced to pay for business expenses and are not getting reimbursed, you may have a claim. Contact the San Francisco employment lawyers at the Ottinger Firm to learn more about your rights to business expense reimbursement. Some Examples: Business Expense Reimbursement For Home Health Care Workers A home health care worker begins her day at patient A’s house in Oakland.  The home health care worker then drives to patient B’s house which is half an hour away in San Francisco. The home health care worker is entitled to be reimbursed for both the travel expenses incurred and for the time it takes to travel between work sites.  This means, the home health care worker should be reimbursed for the expenses incurred in driving from A to B, including mileage and tolls, and is also entitled to be paid for the half hour it takes to make the drive to San Francisco. Many employers fail to pay travel expenses or for travel time. However, if you are required by your employer to travel between various work sites as part of your job duties, then you should be paid for that time.  Contact the Ottinger Firm to learn more about your right to expense reimbursement and travel time pay. Business Expense Reimbursement for Outside Sales Associates An outside sales associate for a radio station is required to use her own car to drive to various client meetings throughout the day.  The sales associate is also required to use her personal cell phone to make work calls and send work related emails and texts. The outside sales associate, is entitled to reimbursement of expenses incurred in driving to her various clients.  She is also entitled to reimbursement for cell phone related expenses.  A recent California Court of Appeal decision found that employers must reimburse employees for work-related phone calls made on personal cell phones or face liability. The outside sales associate may also be entitled to reimbursement of meal and other entertainment expenses incurred as part of the sales process. … San Francisco employees are not  required pay for work related expenses.  If you are being forced to pay for work related expenses, then contact the Ottinger Firm to learn about your rights to business expense reimbursement.

Continue Reading
Employment Law Blog

IS JESSE PINKMAN ENTITLED TO OVERTIME PAY?

THIS POST CONTAINS SOME SPOILERS Jesse Pinkman has a lot of things on his mind, including an open DEA investigation and the violent death of everyone he’s ever loved.  Unpaid wages are probably not high on his list of priorities. Still, he may want to think about talking to an employment lawyer when the dust settles, as Jesse may be owed a lot of money.  Leaving aside for a moment the illegality of his profession, Jesse has an argument that he is entitled to overtime for at least part of the work he did over the course of the show. There’s No “Meth Superlab” Exemption to the FLSA In the first few seasons, Jesse and Walter set up shop in their own Winnebago. They set their own hours, determined the places they worked, and provided their own supplies. As such, they were clearly self-employed, or perhaps independent contractors for Tuco Salamanca and the cartel.  Either way, they would not be entitled to overtime.  Likewise, at the end of the show, Pinkman was more or less enslaved by the Nazis. Overtime at that stage was the least of his concerns. But in Season Three, Walter and Jesse were employed by Gus Fring, the fried chicken magnate and cartel overlord, in his underground meth Superlab. The terms of their employment were determined by Fring, they were paid a fixed salary (of $15 million a year between them), and, especially as Fring became suspicious of Walter, they worked under close supervision. As such, they were most likely employees for the purposes of federal law. Under the Fair Labor Standards Act, all employees are entitled to overtime compensation for any hours worked over forty in a given workweek, unless they fall within one of several defined exemptions. For instance, “learned professionals”–employees in a position that requires an advanced degree, such as doctors and lawyers–are not entitled to overtime compensation. Computer specialists, executive employees, outside salespeople, small farmer workers, and casual domestic workers are all likewise exempt from overtime rules. Walter White was Jesse’s supervisor and manager, and would therefore fall under the executive exemption. But Jesse does not neatly fit into any of these categories. By the middle of season four, Gus and Walter had agreed to a long term, $15 million a year deal. Assuming Jesse was entitled to half, he was making a salary of $7.5 million per year. The most likely exemption that Jesse might fall under would therefore be for “highly compensated” workers. The federal regulations contain a special rule for  workers who make $100,000 or more per year. To qualify for this exemption, however, Jesse would have to perform “office or non-manual work” as his primary duty, and cooking meth arguably falls outside the scope of that rule. Of course, bringing a federal lawsuit against Gus Fring’s estate or Los Pollos Hermanos for unpaid overtime compensation would lead to some extremely uncomfortable questions about tax evasion and money laundering (not to mention building a methamphetamine  empire). Most fans probably hope that after Jesse’s final escape he is free and happy in Alaska. But if he ends up getting what’s coming to him, he might as well try to make sure that includes unpaid wages. I wonder if Saul Goodman takes employment cases?

Continue Reading
Employment Law Blog

Overtime Pay Basics

Everyone is Assumed to be Entitled to Overtime Pay Under the law, everyone is assumed to be entitled to overtime pay.   It does not matter how you are paid or what kind of work you do.  Even people who earn a salary are entitled to it.   Most all jobs that involve manual labor or clerical/administrative office work qualify for overtime pay. The Exemptions to Overtime Pay The law assumes that everyone should get overtime pay – UNLESS they fall into an exemption.  There are many exemptions but the four most common ones are listed below. Managers People who are genuine managers are exempt.  To qualify for this exemption, the person must manager two or more people and managing people must be the focus of their job.  If a person manages just a few people and spends the bulk of their effort on other tasks they may not qualify as a manager. Employees are often misclassified as managers just to avoid the overtime pay requirement. Executives High level company officials who run a company or department within a company are also exempt.  See the U.S. Department of Labor Fact Sheet for more on the Executive and Managerial exemption. High Level Administrators Employees who make important, unsupervised, business decisions are also exempt. Learned Professions People with advanced degrees like doctors, dentists, lawyers and the like are also exempt. These are the four most common exemptions.  See a more detailed explanation of your rights to overtime pay on our New York Overtime Lawyers page.   If you have questions, please give us a call for a free consultation.

Continue Reading
Employment Law Blog

5 Tricks Companies Use to Avoid Paying Overtime to Employees

The overtime pay laws are old and complicated and most people do not understand them. Many companies do their best to NOT explain the laws to their employees.  Here is a list of 5 tricks with examples that companies use to cheat employees out of overtime pay: Trick #1. Working Off The Clock Some people are required to work a strict eight hour schedule and only get paid for those eight hours.  BUT employers often require employees to arrive early to boot up a computer, configure programs or do some other preparation so they are ready to go when their shift starts. This kind of “be ready pre-work” can require anywhere from 10 to 30 minutes (or more) before the shift.  It may also be required at the end of shift as well. Another example of this “off the clock trick” is a customer service rep who is required to take any call that comes in before the shift ends, but stay on the call until the matter is resolved.   This could keep an employee working another 15 or 30 minutes past their shift. These examples of extra time can add up to overtime hours and require payment at the premium time and half rate.   But many of these employees are simply not paid for “working off the clock.” Trick #2. Inside Sales There are two kinds of sales people: (1) Outside sales people and (2) Inside sales people. Outside sales people are road warriors who spend the majority of their time out of the office. Outside sales people are NOT entitled to overtime pay.Inside sales people spend most of their time in the office drumming up business on the phone or online.  These people ARE entitled to overtime pay.  But, companies frequently classify all salespeople as exempt from overtime.  As a result, inside sales people are frequently deprived of overtime pay. Trick #3.  Salary Most people who earn a salary are under the mistaken belief that they are not entitled to overtime pay.   There is no rule that exempts salaried employees from the right to receive overtime pay.  In fact, the law assumes that ALL employees, salaried and hourly alike, are entitled to overtime pay. As a general rule,  high level employees in management and executive positions are not entitled to overtime pay.  But most other middle and lower level employees are entitled to overtime pay even if they are paid a salary.   Unfortunately, many of these employees do not know they are entitled to overtime pay. Trick #4.  Pseudo Job Titles Have you ever met an Assistant Manager who does not manage anyone?  Or how about a Vice President who is not in charge of anything?  Companies often give employees fancy job titles as a way to trick them out of overtime pay.   The fake job title indicates that the person in that position does the kind of work that would exempt them from overtime pay.  Reality is – these job titles are often deceptive because the company just does not want to pay overtime. For example, the Dollar General Store company gave employees pseudo titles such as Store Managers.  But these managers did very little managing and a lot of hard labor like sweeping and stocking shelves etc… A class action was brought on behalf of 1,424 managers and the company had to pay them $35 Million in unpaid overtime pay due to the bogus job titles.  If you have a job title, make sure it accurately describes what you really do.  It could be a trick to make you think that you are not entitled to overtime pay. Trick #5.  Comp Time Some companies have policy of providing “comp time” to employees who work overtime. Under these programs, EMPLOYEES ARE NOT PAID for the extra hours worked.  Instead, employees are given time off in the future.   These comp time plans are illegal because employees MUST be paid for all time worked, including overtime time. What Should You Do if You are Owed Overtime Pay? We strongly advise that you contact The Ottinger Firm for a free consultation.  Call us at 347-492-1904 (NY) or 415-508-7786 (SF) and we will happy to explain your options and help you recover your overtime pay if you have a case.

Continue Reading