On August 29, 2012, the Fourth Appellate District of the Court of Appeals issued an opinion in Muldrow v. Surrex Solutions Corporation [2012 DJDAR 12088] finding that Brinker (2012) 53 Cal.4th 1004 does not affect its prior conclusion that the trial court properly determined the employees were subject to the commissioned employees exemption, and that the employer has no duty to police meal breaks and ensure no work is performed.
In the Muldrow case, a recruiter sued his employer for failure to pay overtime and meal period compensation. The class of employees was comprised of recruiters that located potential employees for clients of Surrex. Clients only paid Surrex when an employee was successfully placed. The class members were paid a percentage of “adjusted gross profit,” which was calculated by subtracting various costs from the amount clients paid for a placement.
The Court of Appeal found that the class members were engaged principally in sales because the recruiters have to “sell” an employer and an applicant on each other. “Appellants would then attempt to convince both the candidate and the client that the placement of the candidate with the client was a proper fit.” Slip Op. p. 12. Moreover, the Court found that time spent searching candidates on the web, cold calling, etc., is sales related activities.
After reviewing the evidence, the Court held that Surrex’s system constituted a “bona fide” commission system “as a matter of law” because paid commissions to several employees were frequently in excess of their guaranteed draws.
What this means for employers of commissioned employees is that the Courts will evaluate the compensation structure carefully to determine whether the structure is truly commission based as opposed to a hybrid hourly pay plan or a piece rate plan. Therefore, employers must carefully craft and review their structure as the DLSE Enforcement Policies and Interpretations Manual (June 2002) states that “[c]onsistent commission earnings below, at or near the draw are indicative of a commission plan that is not bona fide.”
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