Filed 1/4/22 Tessitore v. Macy’s West Stores CA4/1

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COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

CRAIG TESSITORE,

Plaintiff and Appellant,

v.

MACY’S WEST STORES, INC.,

Defendant and Respondent.

 D078292

 (Super. Ct. No. 37-2018-

 00044691-CU-OE-CTL)

APPEAL from a judgment of the Superior Court of San Diego County, 

Ronald L. Styn, Judge. Affirmed.

Law Offices of Kirk D. Hanson, Kirk D. Hanson; Esner, Chang & 

Boyer, and Stuart B. Esner, for Plaintiff and Appellant.

Jackson Lewis, Christine M. Fitzgerald, Lara P. Besser; Macy’s Law 

Department, and David E. Martin, for Defendant and Respondent.

Craig Tessitore appeals a judgment in favor of his employer, Macy’s 

West Stores, Inc. (MWS), on Tessitore’s causes of action under the Labor 

Code Private Attorneys General Act (PAGA; Lab. Code, § 2698 et seq.).1 

1 Subsequent statutory references are to the Labor Code unless 

otherwise stated.
2

Tessitore primarily claimed that MWS’s commission-based compensation 

program for sales employees violates the Labor Code’s prohibitions on 

improper wage deductions (§ 221) and secret underpayment of wages (§ 223) 

by effectively reducing an employee’s compensation when a customer later 

exchanges an item for essentially the same item (an “even exchange”) or 

when a customer requests and receives a credit because an item has gone on 

sale after purchase (a “price adjustment”). Tessitore and MWS filed crossmotions for summary judgment on these issues. The trial court found that 

MWS’s compensation program did not violate the Labor Code, granted 

MWS’s motion, denied Tessitore’s motion, and entered judgment accordingly.

On appeal, Tessitore contends MWS’s compensation program is 

unlawful for the same reasons as in the trial court. We disagree. MWS’s 

compensation program pays commissions based on an employee’s net sales in 

a given work week. The net sales figure is calculated by taking an employee’s 

gross sales and subtracting returns, exchanges, and price adjustments. MWS 

promises to pay commissions based on this calculation, and it is undisputed 

that it does so. Because MWS pays its employees according to the terms of 

its compensation program, its employees do not suffer any wage deduction 

under section 221 or secret underpayment under section 223. And, while an 

employer may not impose unlawful wage deductions under the guise of a 

calculation or formula, MWS’s even exchange and price adjustment policies 

do not run afoul of California’s wage protection statutes. We therefore affirm 

the judgment in favor of MWS and against Tessitore.

FACTUAL AND PROCEDURAL BACKGROUND

Tessitore has worked for MWS or its predecessors for over 30 years. 

For the past decade, he has been employed as a “draw versus commission” 

sales associate at an MWS store in San Diego. In 2017, MWS instituted a 
3

new compensation program for commissioned sales employees. The program 

is described in an MWS publication entitled, “Understanding Commission: 

An Associate’s Guide to Macy’s Commission Pay Plans.” The program’s

stated purpose is “to provide associates with an incentive to increase their 

overall Sales Productivity with respect to the sale of commission-eligible 

merchandise.” 

A key component of the compensation program is “ ‘Commission Sales 

Productivity,’” which the “Understanding Commission” publication describes

as “that amount equal to [the employee’s] total Net Sales of commissioneligible merchandise in a particular work week.” The publication explains, 

“The calculation and payment of Commission Pay are not made on the basis 

of [the employee’s] sales of individual items of merchandise. Rather 

commission pay is based on your Commission Sales Productivity, or overall 

Net Sales of commission-eligible merchandise, for a particular work week.” 

The program defines “ ‘Gross Sales’ ” as essentially the purchase price 

and other amounts paid by the customer for all merchandise sold in a 

particular week. The program defines “ ‘Net Sales’ ” as “that amount equal to 

the Gross Sales minus discounts (such as employee discounts and back office 

discounts), taxes, Price Adjustments, and Eligible Returns made in that work 

week.” For example, if a sales associate sells two pairs of $200 shoes, plus a 

$20 delivery fee and $35.70 in taxes, the associate’s gross sales for that week 

would be $455.70 and his net sales would be $400. His commission sales 

productivity would likewise be $400, which would be used to calculate the 

associate’s commission pay for the week.

MWS has an eligible return period of 180 days. Under the program, 

“[r]eturns within the Eligible Return Period are attributed to the Original 

Associate.” Continuing the example above, if a few weeks later the associate 
4

makes $10,300 in gross sales, but a customer returns one previouslypurchased $200 pair of shoes, the amount of the return would be subtracted 

from the associate’s gross sales for the week, resulting in $10,100 in net sales. 

Merchandise returned as part of an exchange is treated as a return for 

purposes of MWS’s compensation program. The “Understanding 

Commission” publication states, “Sometimes a customer returns merchandise 

and makes another purchase. In fact, you should treat all returns as an 

opportunity to increase your Commission Sales Productivity.” It goes on to 

explain, “An ‘Even Exchange’ occurs when the customer returns merchandise 

and replaces it with essentially the same item. For example, she returns a 

shirt in Medium and replaces it with the same item in Large. Even 

Exchanges within the Eligible Return Period are treated as a return 

attributed to the Original Associate and a sale attributed to the associate 

processing the exchange.” Similarly, “[a]n ‘Uneven Exchange’ occurs when 

the customer returns merchandise and then purchases something 

different. . . . Uneven Exchanges within the Eligible Return Period are 

treated as a return attributed to the Original Associate and a sale attributed 

to the associate processing the exchange.” 

A related transaction is a price adjustment. “A ‘Price Adjustment’ 

occurs when, in accordance with [MWS’s] return policies, a customer requests 

and receives a credit due to merchandise going on sale after the original date 

of purchase. . . . Because a Price Adjustment happens within the Eligible 

Return Period, the amount of the Price Adjustment is considered a Return 

and is applied against the Original Associate’s Net Sales for the work week 

that the Price Adjustment is made.” 

A sales associate’s commission pay is calculated each week and earned 

when paid. As the “Understanding Commission” publication explains, 
5

“Commission Pay is earned when the audit and verification of your 

Commission Sales Productivity, or overall Net Sales of commission-eligible 

merchandise for the work week, are completed. The auditing and verification 

of your Commission Sales Productivity for a work week is completed when 

you receive your Commission Pay for that work week.” In addition to 

commission pay, “draw versus commission” sales employees like Tessitore 

receive standard hourly wages equal to the minimum wage in the locality 

where they work.2

Tessitore’s operative PAGA complaint challenged the even exchange 

and price adjustment aspects of MWS’s compensation program. His first 

cause of action alleged that the program violates section 221 because it 

subjects him to “unlawful deductions from his earned commission wages 

under [MWS’s] illegal commission chargeback schemes.” Specifically, 

Tessitore alleged the even exchange and price adjustment policies deducted 

wages from the earned commissions of the employee who originally made the 

sale. In Tessitore’s view, under the even exchange policy, the commission 

previously paid is “taken back by [MWS] through a deduction from the Sales 

Employee’s wages, and the commission is then paid to the Sales employee 

who made the exchange, despite the fact that the Sales Employee who made 

the exchange performed no work to generate the sale.” Under the price 

adjustment policy, MWS receives the difference in commissions, thereby 

2 As the name suggests, in addition to commission pay and standard 

hourly wages, “draw versus commission” employees can also receive “draws” 

(i.e., advances) on future commission pay. This aspect of MWS’s 

compensation program is not at issue in this appeal. Other employees, called 

“Base +” associates, receive commission pay and a standard hourly wage that 

may be higher than minimum wage. MWS uses the same calculation for 

commission pay for both “draw versus commission” and “Base +” employees, 

and Tessitore’s PAGA claims cover both types of employees. 
6

“illegally shift[ing] [MWS’s] cost of doing business to the Sales Employees by 

forcing these employees to subsidize the reduction in price of [MWS’s] 

merchandise by giving back the commissions they earned on the original sale 

through illegal deductions from their commission wages.” Tessitore’s second 

cause of action alleged that the even exchange and price adjustment policies 

violated section 223 because they resulted in underpayment of wages that 

was kept secret from California’s enforcement agencies. His third cause of 

action alleged violations of sections 201, 202, and 203 because MWS’s 

underpayment of wages resulted in a failure to pay wages in full when an 

employee resigns or is discharged. Tessitore sought civil penalties and 

attorney fees under PAGA. 

MWS moved for summary judgment on Tessitore’s claims. It contended 

that its compensation program did not result in any deductions, illegal or 

otherwise, from Tessitore’s earned commissions. It paid him according to the 

program’s terms and did not withhold any amounts. Moreover, because the 

even exchange and price adjustment policies were tied to specific sales 

Tessitore made, MWS did not shift its cost of doing business to him. 

MWS relied on deposition testimony from its executive in charge of the 

commission-based compensation program. For even exchanges, the executive

explained that the original associate “didn’t complete the sale” because, for 

example, “the size wasn’t correct and the [associate] didn’t . . . have the 

person try on the product; the color wasn’t correct, and they told them they 

looked great in it and they didn’t. So there are . . . many different reasons 

why that sale wasn’t completed, but what’s most important is it wasn’t 

completed.” For price adjustments, the executive explained that MWS has 

sales promotions “to help drive traffic into the stores to drive sales and, 

ultimately, help the sales colleagues generate commission[.] Get the foot 
7

traffic in the door.” A customer can request a price adjustment within 

10 days of purchase. The price adjustment policy “help[s] save the sale” for 

the original associate, because otherwise the customer would simply return 

or exchange the merchandise, thereby reducing the original employee’s net 

sales for the period by the full amount of the returned or exchanged 

merchandise. 

In his deposition testimony, Tessitore agreed that sales promotions are 

a tool to help him generate more sales. He explained that his department 

has regular sales and it is “rare” when nothing is on sale. It can be a 

“challenge” when there are no active sales. When customers see sale items 

“it brings them in. . . . That’s usually a good thing.” Tessitore also agreed 

that MWS’s price adjustment policy is a tool to help him sell merchandise, 

because he can tell customers they can come back and get a credit if the 

merchandise later goes on sale. The compensation program’s treatment of 

price adjustments preserves a part of the benefit for the original associate 

who made the sale. 

Tessitore moved for summary judgment as well. He contended that 

MWS’s even exchange policy violated California’s “procuring cause” rule, and 

sections 221 and 223, because it took away the earned commission wages 

from the employee who procured the sale and gave them to another employee. 

He contended that the price adjustment policy violated sections 221 and 223 

because “it forces the employee to share [MWS’s] business costs associated 

with [MWS’s] decision to put merchandise on sale after it has been sold by 

the employee at the original price.” 

Based on the “Understanding Commission” publication and the 

testimony of the MWS executive, Tessitore emphasized that commission 

wages are earned when paid by MWS to the employee. They are not mere 
8

advances on future wages. In Tessitore’s view, the deductions used to 

calculate net sales, based on even exchanges and price reductions, took back 

wages earned in prior weeks. MWS could not defend the practice by claiming

that these deductions were simply steps in calculating the commissions due 

to the employee. 

After hearing argument, the trial court issued a written order granting 

MWS’s motion for summary judgment and denying Tessitore’s motion. It 

found, “Based on the terms of the [‘Understanding Commission’ publication], 

[Tessitore] agreed that his Commission Pay would be based on his 

Commission Sales Productivity; [Tessitore] agreed that his Commission Sales 

Productivity would be based on his Net Sales; and [he] agreed that his Net 

Sales would be calculated by subtracting, inter alia, Price Adjustments and 

Eligible Returns made in the work week from [his] Gross Sales in the same 

work week. Since the [‘Understanding Commission’ publication] defines the 

‘Eligible Return Period’ as 180-days, [Tessitore] agreed to a chargeback 

procedure whereby newly earned commissions are subject to reduction via a 

chargeback of previously earned commissions for 180-days after the 

commission is earned.” Relying on Steinhebel v. Los Angeles Times 

Communications, LLC (2005) 126 Cal.App.4th 696 (Steinhebel), the court 

found that MWS’s policies did not violate the Labor Code. The court did not 

find Tessitore’s emphasis on “earned” wages persuasive. It explained, 

“Irrespective of use of the term ‘earned,’ [Tessitore] agreed that his 

Commission Pay is earned based on calculation of his Commission Sales 

Productivity and his Commission Sales Productivity for any week is 

calculated based on a reduction for Price Adjustments and Eligible Returns 

made on sales from previous weeks.” It reasoned that Tessitore’s 

commissions “are not actually ‘earned’ until all of the legal conditions 
9

precedent have been met, i.e., until all reductions for Price Adjustments and 

Eligible Returns are taken, as calculated by the Commission Sales 

Productivity.” The court entered judgment in favor of MWS, and Tessitore 

appeals. 

DISCUSSION

I

Summary Judgment Standards

“ ‘On review of an order granting or denying summary judgment, we 

examine the facts presented to the trial court and determine their effect as a 

matter of law.’ [Citation.] We review the entire record, ‘considering all the 

evidence set forth in the moving and opposition papers except that to which 

objections have been made and sustained.’ [Citation.] Evidence presented in 

opposition to summary judgment is liberally construed, with any doubts 

about the evidence resolved in favor of the party opposing the motion.” 

(Regents of the University of California v. Superior Court (2018) 4 Cal.5th 

607, 618 (Regents).)

“Summary judgment is appropriate only ‘where no triable issue of 

material fact exists and the moving party is entitled to judgment as a matter 

of law.’ ” (Regents, supra, 4 Cal.5th at p. 618.) “A plaintiff or crosscomplainant has met his or her burden of showing that there is no defense to 

a cause of action if that party has proved each element of the cause of action 

entitling the party to judgment on the cause of action. Once the plaintiff or 

cross-complainant has met that burden, the burden shifts to the defendant or 

cross-defendant to show that a triable issue of one or more material facts 

exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, 

subd. (p)(1).) “A defendant or cross-defendant has met his or her burden of 

showing that a cause of action has no merit if the party has shown that one 
10

or more elements of the cause of action, even if not separately pleaded, 

cannot be established, or that there is a complete defense to the cause of 

action. Once the defendant or cross-defendant has met that burden, the 

burden shifts to the plaintiff or cross-complainant to show that a triable issue 

of one or more material facts exists as to the cause of action or a defense 

thereto.” (Id., subd. (p)(2).) 

“We review the record and the determination of the trial court de novo.” 

(Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th 990, 1003.) 

“Furthermore, ‘[i]t is axiomatic that we review the trial court’s rulings and 

not its reasoning.’ [Citation.] Thus, a reviewing court may affirm a trial 

court’s decision granting summary judgment for an erroneous reason.” 

(Coral Construction, Inc. v. City & County of San Francisco (2010) 50 Cal.4th 

315, 336 (Coral Construction).) We are not bound by the trial court’s stated 

reasons for granting summary judgment. (Canales v. Wells Fargo Bank, N.A. 

(2018) 23 Cal.App.5th 1262, 1268 (Canales).) 

II

Unlawful Wage Deductions

This appeal concerns the wages earned by MWS sales employees, in the 

form of commission pay. “ ‘Wages’ includes all amounts for labor performed 

by employees of every description, whether the amount is fixed or ascertained 

by the standard of time, task, piece, commission basis, or other method of 

calculation.” (§ 200, subd. (a).) “Wages of workers in California have long 

been accorded a special status generally beyond the reach of claims by 

creditors including those of an employer. This public policy has been 

expressed in the numerous statutes regulating the payment, assignment, 

exemption and priority of wages.” (Kerr’s Catering Service v. Department of 

Industrial Relations (1962) 57 Cal.2d 319, 325 (Kerr’s Catering).) “Because 
11

the laws authorizing the regulation of wages, hours, and working conditions 

are remedial in nature, courts construe these provisions liberally, with an eye 

to promoting the worker protections they were intended to provide.” 

(Prachasaisoradej v. Ralphs Grocery Co., Inc. (2007) 42 Cal.4th 217, 227 

(Prachasaisoradej).)

In general, California law prohibits an employer from taking 

deductions from earned wages: “It shall be unlawful for any employer to 

collect or receive from an employee any part of wages theretofore paid by said 

employer to said employee.” (§ 221.) This statute, in combination with other 

related statutes, “establish[es] a public policy against any deductions, setoffs, 

or recoupments by an employer from employee wages or earnings, except 

those deductions specifically authorized by statute.” (Prachasaisoradej,

supra, 42 Cal.4th at p. 241.)

Drawing on common definitions, our Supreme Court has explained that 

an employer “takes a ‘deduction’ or ‘contribution’ from an employee’s ‘wages’ 

or ‘earnings’ when it subtracts, withholds, sets off, or requires the employee 

to return, a portion of the compensation offered, promised, or paid as offered 

or promised, so that the employee, having performed the labor, actually 

receives or retains less than the paid, offered, or promised compensation, and 

effectively makes a forced ‘contribution’ of the difference.” (Prachasaisoradej,

supra, 42 Cal.4th at p. 228.)

“The use of the device of deductions creates the danger that the 

employer, because of his superior position, may defraud or coerce the 

employee by deducting improper amounts. . . . [I]t was the utilization of 

secret deductions or ‘kick-backs’ to make it appear that an employer paid the 

wage provided by a collective bargaining contract or by a statute, although in 

fact he paid less, that led to the enactment of . . . sections 221-223 in 1937. 
12

These sections . . . ‘are declarative of an underlying policy in the law which is 

opposed to fraud and deceit.’ ” (Kerr’s Catering, supra, 57 Cal.2d at pp. 328-

329.)

The statutes specifically authorize an employer to make deductions 

from earned wages where, among other circumstances, “a deduction is 

expressly authorized in writing by the employee to cover insurance 

premiums, hospital or medical dues, or other deductions not amounting to a 

rebate or deduction from the standard wage arrived at by collective 

bargaining or pursuant to wage agreement or statute.” (§ 224.) But this 

exception is subject to various limitations intended to protect the employee 

from exploitation by his employer.

For example, in one early case, cited with approval in Kerr’s Catering,

supra, 57 Cal.2d at page 329, an employer’s practice of deducting an amount 

from its employee’s wages to cover lodging and transportation was found 

unlawful. (Shalz v. Union School Dist. (1943) 58 Cal.App.2d 599, 604-605.) 

The court held that an employer could enter into a written contract with its 

employees to make such a deduction, but the deduction “must bear some 

reasonable relation to the services furnished[.]” (Id. at p. 607.) The 

challenged deductions were unlawful because “the charges made were 

exorbitant and entirely out of proportion to the services rendered and were 

used as a device to reduce the wage scale.” (Id. at p. 605.)

Kerr’s Catering highlights another important limitation, that an 

employee cannot be made the insurer of an employer’s business losses. 

(Kerr’s Catering, supra, 57 Cal.2d at p. 328.) In Kerr’s Catering, the 

employees earned a specified commission on sales over a certain minimum, 

but the employer deducted “the amount of any ‘cash shortage’ attributable” to 

the employee. (Id. at p. 322.) “[T]he parties stipulated that the deductions 
13

from the wages of plaintiff’s employees are taken for shortages ‘not caused by 

a dishonest or wilful act or by the culpable negligence of the employee.’ 

Deductions may be made, therefore, for losses beyond the employees’ control, 

as well as for losses due to simple negligence. The employees, through this 

device, are in effect made insurers of the employer’s merchandise, and the 

commissions earned by the employees which are subject to the deduction 

serve the same purpose as an employee’s ‘bond’ exacted by the employer to 

cover shortages.” (Id. at p. 327.) The Supreme Court explained that the 

deductions “appear to be in contravention of the spirit, if not the letter, of the 

Employee’s Bond Law,” which strictly limits the circumstances in which an 

employer may demand a bond from an employee to cover its losses. (Id. at 

p. 328; see § 400 et seq.)3

Following Kerr’s Catering, a number of courts have disapproved of 

compensation programs that shifted the risk of an employer’s general 

business losses to its employees. In Quillian v. Lion Oil Co. (1979) 

96 Cal.App.3d 156, 158 (Quillian), an employer paid its gas station managers 

a base salary and a monthly bonus. The bonus was calculated in two steps: 

first, a “ ‘tentative amount of bonus’ ” was computed based on a percentage of 

the station’s sales; and second, the employer “ ‘deducted any cash or 

merchandise stock shortage occurring during the period[.]’ ” (Id. at p. 159.) 

3 The precise dispute in Kerr’s Catering involved the Industrial Welfare 

Commission’s power to promulgate and enforce a regulation prohibiting an 

employer from “ ‘mak[ing] any deduction from the wage of an employee for 

any cash shortage, breakage, or loss of equipment, notwithstanding any 

contract or arrangement to the contrary, unless it can be shown that the 

shortage, breakage, or loss is caused by a dishonest or wilful act, or by the 

culpable negligence of the employee.’ ” (Kerr’s Catering, supra, 57 Cal.2d at 

p. 322.) The Supreme Court held that the Industrial Welfare Commission 

had such power. (Id. at p. 330.) The regulation remains in force. (See Cal. 

Code Regs., tit. 8, § 11070 (Regulation 11070).)
14

The court found this program indistinguishable from Kerr’s Catering and 

concluded “that the bonus herein is in contravention of the public policy 

expressed in [the statutes] pertaining to cash bonds that may be required of 

employees.” (Id. at p. 163.) The court rejected the employer’s argument that 

its program was not unlawful because the deduction occurred as part of the 

employer’s calculation of the bonus, rather than afterward. (Ibid.) The court 

explained, “It appears to this court that this is merely a clever method of 

circumventing the statutory definition of wages. The bonus herein described 

is, in fact, a scheduled payment based on the number of gallons of motor fuel 

sold plus a [one] percent commission on other sales. Rather than call this 

incentive payment a commission and then deduct for shortages in 

contravention to Kerr, appellant deducts shortages from the payment and 

calls the final result a bonus. Appellant then self-righteously proclaims that 

no deductions were made from the bonus. Unfortunately, the result is the 

same. The manager carries the burden of losses from the station.” (Ibid.)

Similarly, the court in Hudgins v. Neiman Marcus Group, Inc. (1995) 

34 Cal.App.4th 1109, 1111-1112 (Hudgins), found unlawful a compensation 

program for retail sales employees that deducted a pro rata share of 

“ ‘unidentified returns’ ” from the employees’ commissions. The program 

calculated the employees’ commissions “by multiplying the sales associate’s 

net sales by a predetermined commission percentage, which varied depending 

on the type of merchandise sold. Net sales equaled gross sales less returns, 

taxes, gift wrap and alterations. ‘Returns’ consisted of all merchandise 

originally sold by the sales associate and returned during the pay period with 

adequate documentation to ascertain the identity of the original sales 

associate. Once the sales associate’s net sales were multiplied by the 

predetermined percentage for the items sold, the total commission income 
15

was known.” (Id. at p. 1113.) The employer then made the challenged 

deduction, subtracting from the employee’s commission income “a prorated 

share of the commissions deemed to have been paid on unidentified returns 

received in the sales associate’s home base during the pay period[.]” (Ibid.) 

Unidentified returns were defined as returns “for which the original 

sales associate could not be determined.” (Hudgins, supra, 34 Cal.App.4th at 

p. 1113.) The causes of such unidentified returns included employee abuse, 

such as concealing the identity of the original selling associate, and customer 

neglect or abuse tolerated by the employer, such as returns without the 

proper documentation or the “return” of stolen merchandise. (Id. at p. 1123 

& fn. 11.)

Hudgins held that the employer’s compensation program unlawfully 

made the employee the insurer of the employer’s business losses, as in Kerr’s 

Catering and Quillian. (Hudgins, supra, 34 Cal.App.4th at p. 1123.) “By its 

terms, the unidentified returns policy calls for deductions from earned 

commission wages of all sales associates a sum of money representing what 

would otherwise be business losses occasioned by the misconduct or 

negligence of some of its employees and customers. The deduction is 

unpredictable, and is taken without regard to whether the losses were due to 

factors beyond the employee’s control. [The employer] cannot avoid a finding 

that its unidentified returns policy is unlawful simply by asserting that the 

deduction is just a step in its calculation of commission income.” (Id. at 

pp. 1123-1124.)

Our Supreme Court examined these authorities in Prachasaisoradej,

supra, 42 Cal.4th 217. At issue in Prachasaisoradej was “a written incentive 

compensation plan (ICP or Plan) whereby certain employees of each [Ralphs 

grocery] store were eligible to receive, over and above their regular wages, 
16

supplementary sums based upon how the store’s actual Plan-defined profits, 

if any, for specified periods compared with preset profitability targets. For 

both target and actual purposes, profits were determined by subtracting store 

operating expenses from store revenues.” (Id. at p. 222.)

“Employees’ expectations with respect to these supplementary 

payments—i.e., what Ralphs offered or promised to pay—derived exclusively 

from the terms of the Plan itself.” (Prachasaisoradej, supra, 42 Cal.4th at 

p. 229.) “By the Plan’s terms, it was only after the store had completed the 

relevant period of operation, and the resulting profit or loss figure was then 

derived, that it was possible to determine, by a further comparison to the 

preset targets, whether Plan participants were entitled to a supplementary 

incentive compensation payment, and if so, how much. This final figure, and 

this figure only, once calculated, was the amount offered or promised as 

compensation for labor performed by eligible employees, and it thus 

represented their supplemental ‘wages’ or ‘earnings.’ ” (Ibid.)

The plaintiff conceded that Ralphs properly calculated and paid the 

amounts due under the plan, and it did not withhold or deduct “any 

unauthorized amount from any employee’s supplementary incentive 

compensation as finally computed and paid under the Plan.” 

(Prachasaisoradej, supra, 42 Cal.4th at p. 229.) Instead, the plaintiff 

contended that Ralphs violated the law “because, by subtracting workers’ 

compensation costs, and damage or loss expenses beyond individual 

employees’ control, from the store’s revenues to determine the profit figure on 

which supplementary incentive compensation payments were calculated, the 

Plan reduced, to that extent, the ‘wages’ or ‘earnings’ otherwise due. 

Accordingly, plaintiff asserts, Ralphs effectively shifted to employees, by 
17

virtue of deductions from their expected wages, costs the law requires the 

employer to bear on its own.” (Id. at p. 230.) 

The Supreme Court disagreed. (Prachasaisoradej, supra, 42 Cal.4th at 

p. 230.) After reviewing Kerr’s Catering, Quillian, and Hudgins, the court 

held that “the Plan does not resemble in letter or spirit, the prohibited 

deduction, setoff, or recapture of expected wages for the purpose of saddling 

employees with prohibited employer costs, as was at issue in [those cases].” 

(Id. at p. 236.) The court explained, “In each of those cases, the employee’s 

compensation, whether regular or supplementary, was set, in essence, as a 

sales commission, i.e., a specified and promised share of the revenues 

attributable to that employee’s personal sales or managerial efforts. The set 

commission was then directly reduced by the full dollar value of merchandise 

and cash losses, as determined by the employer, and regardless of employee 

fault. The employer thus defrayed its merchandise and cash losses by 

charging them, dollar for dollar, against its liability for wages. Without 

following the rules for cash bonds, the employer assessed individual 

employees the entire unliquidated value of such losses, and did so by 

withholding amounts from earned and promised commissions until those 

commissions fell to zero. By this means, the employer reduced individual 

employees’ wages to increase its own retained profits. This is the practice the 

statutes, regulations, and cases have prohibited.” (Ibid.)

By contrast, the incentive compensation plan offered by Ralphs 

promised nothing other than a percentage of each store’s profits. 

(Prachasaisoradej, supra, 42 Cal.4th at p. 236.) “Amounts calculated as a 

percentage of the store’s Plan-defined profit were the only ‘wages’ or 

‘earnings’ offered or promised to eligible employees under the Plan. Ralphs 

took no unauthorized deductions or contributions, direct or indirect, from the 
18

wages so offered or promised. If there was uncertainty in the amount 

ultimately due, it arose, not from employer charge-backs taken after the basic 

Plan wage was determined, but inherently from the basis on which Plan 

compensation was awarded.” (Id. at p. 237.)

The Supreme Court rejected the plaintiff’s suggestion that Quillian and 

Hudgins required a finding that the plan was unlawful. (Prachasaisoradej, 

supra, 42 Cal.4th at p. 238, fn. 11.) The court explained, “In those cases,

employees were promised commissions set by a specific formula on the basis 

of sales volume or revenues generated by their own individual efforts. Cash 

and merchandise losses were then assessed against the employees to reduce 

these expected wages. The order in which calculations were performed to 

achieve that prohibited result was irrelevant. ICP’s such as Ralphs’s start 

from the fundamentally different premise that the basic measure of the 

compensation due is the overall profitability of the enterprise. By its 

inherent nature, such a plan does not promise, or even create, incentive 

compensation unless and until profitability occurs and is determined.” (Ibid.) 

The court further distinguished the situation “whereby the employer 

promised the employee compensation of ‘$15 per hour less $3 per hour for 

each workers’ compensation claim filed by the employee.’ [Citation.] What is 

promised in that case is a $15 per hour wage. Kerr’s Catering, Quillian, and 

Hudgins indicate that the employer cannot then take a prohibited deduction 

from the promised wage, even if it announces in advance that it will do so.” 

(Ibid.)

The Supreme Court noted that “it is difficult to see how plaintiff’s basic 

premise would not entirely eliminate net earnings or profits as a legal basis 

for calculating supplementary incentive compensation.” (Prachasaisoradej,

supra, 42 Cal.4th at p. 240.) Although “plaintiff’s complaint and arguments 
19

focus on particular categories of employer expenses, such as workers’ 

compensation costs (citing section 3751) and cash shortages and merchandise 

losses (citing Kerr’s Catering, Quillian, Hudgins, and Regulation 11070),” the 

statutes “establish a public policy against any deductions, setoffs, or 

recoupments by an employer from employee wages or earnings, except those 

deductions specifically authorized by statute.” (Prachasaisoradej, at pp. 240-

241.) Thus, under the plaintiff’s theory, an employer would not be allowed to 

make any expense deductions for purposes of calculating the basis for a 

profit-based compensation plan. (Id. at p. 241.) Plaintiff’s theory was 

therefore unpersuasive. (Id. at pp. 241-242.)

Three justices dissented from the majority’s conclusion. The dissenting 

opinion focused on the inclusion of workers’ compensation costs in the plan’s 

profit calculations, which it found expressly prohibited by section 3751. 

(Prachasaisoradej, supra, 42 Cal.4th at p. 245 (dis. opn. of Werdegar, J.); 

see § 3751 [“No employer shall exact or receive from any employee any 

contribution, or make or take any deduction from the earnings of any 

employee, either directly or indirectly, to cover the whole or any part of the 

cost of compensation under this division.”].) The dissent noted that the same 

argument could potentially be made based on the inclusion of costs for cash 

and merchandise shortages, but it was unnecessary to explore that issue 

further to resolve the appeal. (Prachasaisoradej, at p. 248, fn. 4 (dis. opn. of 

Werdegar, J.).) The dissent did not consider deductions more broadly, except 

to observe that “employers can still adopt incentive plans tied to a company’s 

sales and revenue. They simply cannot also tie the plan to workers’ 

compensation costs.” (Id. at p. 252.)
20

III

MWS’s Commission Pay

As noted, MWS pays commissions based on its sales employees’ weekly 

net sales, i.e., their gross sales minus returns, exchanges, and price 

reductions, among other things. Its “Understanding Commission” publication 

explains, “The calculation and payment of Commission Pay are not made on 

the basis of [the employee’s] sales of individual items of merchandise. Rather 

commission pay is based on your Commission Sales Productivity, or overall 

Net Sales of commission-eligible merchandise, for a particular work week.” 

As an initial matter, we conclude MWS’s compensation program does 

not take deductions or contributions from its sales employees’ earned wages. 

“[A]n employee’s ‘wages’ or ‘earnings’ are the amount the employer has 

offered or promised to pay, or has paid pursuant to such an offer or promise, 

as compensation for that employee’s labor. The employer takes a ‘deduction’ 

or ‘contribution’ from an employee’s ‘wages’ or ‘earnings’ when it subtracts, 

withholds, sets off, or requires the employee to return, a portion of the 

compensation offered, promised, or paid as offered or promised, so that the 

employee, having performed the labor, actually receives or retains less than 

the paid, offered, or promised compensation, and effectively makes a forced 

‘contribution’ of the difference.” (Prachasaisoradej, supra, 42 Cal.4th at 

p. 228.)

Absent some other illegality, the compensation offered or promised to a 

commission-based employee is governed by the contract between the 

employer and the employee. “The compensation owed employees is a matter 

determined primarily by contract.” (Oman v. Delta Air Lines, Inc. (2020) 

9 Cal.5th 762, 781.) “The right of a salesperson or any other person to a 

commission depends on the terms of the contract for compensation.” (Koehl v. 
21

Verio, Inc. (2006) 142 Cal.App.4th 1313, 1330 (Koehl).) “[C]ases have long 

recognized, and enforced, commission plans agreed to between employer and 

employee, applying fundamental contract principles to determine whether a 

salesperson has, or has not, earned a commission.” (Id. at p. 1331.)

Thus, as in Prachasaisoradej, the commissions that MWS sales 

employees expected to receive, i.e., what MWS offered or promised to pay, are 

“derived exclusively from the terms of the [compensation program] itself.” 

(Prachasaisoradej, supra, 42 Cal.4th at p. 229.) The terms of MWS’s 

compensation program are described in its “Understanding Commission” 

publication. In that publication, MWS offered or promised to pay a 

commission based on net sales, i.e., gross sales minus even exchanges and 

price reductions, among other things. This commission pay constitutes the 

wage MWS promised to pay and employees expected to receive based on their 

sales. “This final figure, and this figure only, once calculated, was the 

amount offered or promised as compensation for labor performed by eligible 

employees, and it thus represented their supplemental ‘wages’ or ‘earnings.’ ” 

(Ibid.)

MWS did not deduct or take back any amount from the wage it 

promised to pay its sales employees. As one federal appellate court 

explained, in a similar context, “Because [the employer’s] accounting for 

negative growth was not a deduction from earned commissions, but rather 

the contracted-to means of calculating commissions in the first place, [the 

employer] did not violate [section 221].” (Cohan v. Medline Industries, Inc. 

(7th Cir. 2016) 843 F.3d 660, 667 (Cohan).) MWS’s treatment of even 

exchanges and price adjustments do not constitute deductions under 

section 221 because they do not take back any wages earned by MWS’s sales 

employees. They are factors used to determine those wages.
22

Tessitore attempts to distinguish Prachasaisoradej on the ground that 

its compensation plan was based on the collective effort of Ralphs store 

employees, not their individual efforts, but the Supreme Court’s discussion 

applies broadly to earned wages in this context as well. 

(See Prachasaisoradej, supra, 42 Cal.4th at pp. 229, 237.) Moreover, as in 

Prachasaisoradej, MWS’s commission pay was explicitly incentive-based, and 

it was paid in addition to the standard hourly wages earned by MWS sales 

employees. (See id. at p. 242.)

Tessitore relies on two unpublished federal district court orders. 

(See Nguyen v. Wells Fargo Bank, N.A. (N.D.Cal., Sept. 26, 2016, No. 15-cv05239-JCS) 2016 WL 5390245; Mouchati v. Bonnie Plants, Inc. (C.D.Cal., 

Feb. 5, 2015, No. EDCV 14-00037-VAP (SPx)) 2015 WL 12681309.) But they 

came to similar conclusions as we do here. In Nguyen, the court found that 

an employer’s subtraction of various expenditures in calculating the 

commission due an employee was not a deduction of earned wages under 

section 221. (Nguyen, at *16.) In Mouchati, the court found that an 

employer’s subtraction of labor costs in calculating a manager’s commission 

could potentially be a deduction only if it affected the manager’s noncommission base wage. (Mouchati, at *7.) Other unpublished federal district 

court orders have likewise followed Prachasaisoradej and found that 

subtractions applied in the calculation of commissions do not violate 

section 221. (See Torres v. Wells Fargo Bank, N.A. (C.D.Cal., Oct. 12. 2016, 

No. EDCV 15-2225 PSG (KKx)) 2016 WL 7373856, at *4; see also Smith v. 

Golden State Warriors, LLC (N.D.Cal., May 26, 2020, No. 18-cv-06794-SI) 

2020 WL 2733978, at *6-7.) One court expressly found that reducing a retail

employee’s commissionable net sales based on customer returns did not 

violate section 221 because the employer “is not taking back a wage for 
23

purposes of [section] 221; rather, [the employer] is simply not paying a 

commission that has not been earned.” (Rahmani v. Neiman Marcus 

Group, Inc. (N.D.Cal., Sept. 30, 2006, No. C-04-3313 VRW) 2006 WL 8459733, 

at *11.) Tessitore’s contention that MWS’s treatment of even exchanges and 

price adjustments constitute deductions under section 221, and thus are 

allegedly per se unlawful, is therefore unpersuasive.4

This conclusion does not end our inquiry, however. Tessitore correctly 

points out that an employer cannot impose an unlawful deduction under the 

guise of a calculation or formula, even if it announces the calculation or 

formula in advance and an employee agrees to it. (Hudgins, supra, 

34 Cal.App.4th at p. 1124; Quillian, supra, 96 Cal.App.3d at p. 163; 

see Schachter v. Citigroup, Inc. (2009) 47 Cal.4th 610, 619; Prachasaisoradej,

supra, 42 Cal.4th at p. 237.) The issue therefore is whether MWS’s 

treatment of even exchanges and price reductions is unlawful.

As to even exchanges, Tessitore contends MWS’s policy is unlawful 

because it violates California’s procuring cause doctrine. We disagree. The 

procuring cause doctrine is dependent on the underlying contract governing a 

sales employee’s commissions. “It is established that if the agency contract 

4 In this context, we note that Tessitore has not challenged other, 

arguably analogous aspects of MWS’s net sales calculation, such as its 

treatment of uneven exchanges and outright returns. Tessitore’s position, 

that reductions in commission pay based on MWS’s calculation of net sales 

constitute deductions under section 221, would appear to apply to uneven 

exchanges and outright returns as well. But courts have found that outright 

returns, at least, constitute a valid basis for reducing commission pay. 

(See Hudgins, supra, 34 Cal.App.4th at pp. 1113, 1122; see also 

Prachasaisoradej, supra, 42 Cal.4th at p. 240 [citing Hudgins]; Koehl, supra, 

142 Cal.App.4th at p. 1336 [same].) As one court stated, albeit in 

circumstances where extensive analysis was unnecessary, “California 

law . . . permits [a] policy of paying commissions based on net sales.” 

(Nordstrom Commission Cases (2010) 186 Cal.App.4th 576, 587 (Nordstrom).)
24

contemplates payment of commissions for sales of which the agent was the 

procuring cause, the agent is entitled to commissions on all sales procured by 

him although the sales are actually consummated by the principal after the 

termination of the agency.” (Wise v. Reeve Electronics, Inc. (1960) 

183 Cal.App.2d 4, 12, italics added.) MWS’s compensation program does not 

award commission pay based on a sales employee’s status as the procuring 

cause of any individual sale. Commission pay is determined by an employee’s 

net sales in a given week. Where, as here, the compensation program does 

not incorporate the procuring cause principle, and affirmatively contradicts 

it, the procuring cause doctrine is not applicable. (See Zinn v. Ex-CellO Corp. (1944) 24 Cal.2d 290, 296 [procuring cause doctrine dependent on 

contract]; Wise, at p. 12 [same]; Schuman v. IKON Office Solutions, Inc. 

(9th Cir. 2007) 232 Fed.Appx. 659, 662 [same].) 

Moreover, even if the procuring cause doctrine were relevant, the 

undisputed facts show that the original sales associate is not the procuring 

cause of the sale made in the even exchange. An even exchange does not 

reflect a consummated sale by the original associate, but rather an ultimately 

unconsummated one. The customer found the merchandise unacceptable and 

sought to return it because, for example, it was the wrong size or color. The 

sale made by the original associate was undone, and the second employee 

sold a different item to the customer as a result of the transaction. 

Tessitore’s claim that the original employee “made the sale” and the second 

employee “merely makes the exchange” ignores the reality that the customer 

no longer wanted the merchandise he or she purchased in the initial sale and 

returned that merchandise to the store. The original sales associate is not 

the procuring cause of the later sale, of a different item, in a transaction in 

which the original sales associate had no involvement.
25

Tessitore’s claim likewise assumes that the customer always wanted to 

make an even exchange, rather than return the item outright. But there is 

no basis for such an assumption. Indeed, it is logical for MWS to structure its 

compensation program based on the opposite assumption, to incentivize the 

original sales associate to avoid later exchanges and to incentivize the second 

sales associate to convert outright returns into even exchanges. In his 

deposition testimony, Tessitore agreed that a return is a selling opportunity, 

and he should get credit if he converts the return into an even exchange 

because he spent time with the customer making the sale. The original sales 

associate is not the procuring cause of the sale that resulted from the even 

exchange.

As to price adjustments, Tessitore contends MWS’s policy is unlawful 

because it makes the employee the insurer of MWS’s business losses, i.e., the 

cost of reimbursing the customer for the difference in price between the 

initial purchase price and the sale price. Tessitore is incorrect. The 

reduction in net sales based on price adjustments is tied directly to the 

employee’s sales activity. It is not a general business loss incurred by MWS. 

In economic terms, it is analogous to a policy of recovering the commissions 

paid on returned merchandise, which courts have approved even if it 

effectively subsidizes an employer’s decision to allow such returns. 

(See Cohan, supra, 843 F.3d at pp. 669-670; see also Prachasaisoradej, supra, 

42 Cal.4th at p. 240; Koehl, supra, 142 Cal.App.4th at p. 1336; Hudgins, 

supra, 34 Cal.App.4th at pp. 1113, 1122.) “California law . . . permits [a] 

policy of paying commissions based on net sales.” (Nordstrom, supra,

186 Cal.App.4th at p. 587.)

Tessitore relies on Kerr’s Catering, Quillian, and Hudgins, but they are 

distinguishable. In Kerr’s Catering and Quillian, the employer deducted the 
26

full amount of the cash or merchandise shortage from the commissions due 

the employee. (Kerr’s Catering, supra, 57 Cal.2d at p. 322; Quillian, supra, 

96 Cal.App.3d at p. 159.) The employee was therefore truly the insurer of 

these losses, having made the employer whole. In Hudgins, the employer 

deducted the full amount of the commissions deemed to have been paid on 

unidentified returns from the commissions of the employees in that 

department. (Hudgins, supra, 34 Cal.App.4th at p. 1113.) Again, the 

employees were the insurers of these losses, having made the employer 

whole. Here, MWS does not recover the full amount refunded to the 

customer; it effectively recovers only the amount of the commission paid on 

the price difference. MWS still loses money on the price adjustment 

transaction. It does not implicate the same policy against employee bonds 

cited in Kerr’s Catering, Quillian, and Hudgins. Nor does Tessitore argue 

that it violates Regulation 11070.

In addition, the undisputed facts show that MWS’s practice of placing 

merchandise on sale benefits its commission-based employees by drawing in 

customers and encouraging purchases. And those employees benefit from the 

price adjustment policy itself because customers have protection if the 

merchandise they purchase later goes on sale, encouraging sales and 

preventing future returns. Tessitore testified that he uses the price 

adjustment policy as a “selling tool” to induce the customer to make a 

purchase from him. MWS’s compensation program, which effectively shares

the cost of the policy with sales employees, who also benefit, does not 

resemble a prohibited employee bond, which does not benefit employees at 

all. (See Prachasaisoradej, supra, 42 Cal.4th at p. 240.)

Tessitore also argues that the price adjustment policy is unlawful 

because it leads to variability and unpredictability in an employee’s wages. 
27

(See Kerr’s Catering, supra, 57 Cal.2d at p. 329 [“To subject [an employee’s] 

compensation to unanticipated or undetermined deductions is to impose a 

special hardship on the employee.”].) We note that MWS’s sales employees 

earn a regular hourly wage, regardless of their commission pay. And the 

record does not reflect any significant variability or unpredictability in an 

employee’s commission pay based on the price adjustment policy.

In any event, some uncertainty as a result of the price adjustment 

policy does not render MWS’s compensation plan unlawful. As our Supreme 

Court has explained, “[T]his uncertainty alone cannot cause the plan to 

violate the wage-protection policies of the Labor Code and Regulation 11070. 

To hold otherwise would make every kind of achievement-based 

supplementary incentive compensation system, whether based on individual 

or overall business performance, illegal. [¶] The wage-protection statutes 

and rules do not demand that employee compensation be absolutely certain 

or stable from pay period to pay period, regardless of the employees’ contrary 

understanding. Nor do they forbid a system in which, even though services 

have already been performed, the final amount of wages cannot be 

determined until after specified contingencies have come to pass.” 

(Prachasaisoradej, supra, 42 Cal.4th at p. 239.)

In sum, because MWS offered or promised to pay commissions based on 

net sales, and did in fact pay such commissions, MWS did not deduct or take 

back any earned wages from its sales employees. Moreover, MWS’s net sales 

calculation was not mere subterfuge designed to impose otherwise-unlawful 

deductions. Its even exchange policy does not violate California’s procuring 

cause doctrine, and its price adjustment policy does not make MWS’s sales 

employees the insurers of its general business losses. Unlike Kerr’s Catering, 

Quillian, and Hudgins, there is no effort by MWS to unfairly impose on its 
28

sales employees the costs of doing business. MWS’s compensation program is 

transparent and reasonable. It does not impose “secret deductions or ‘kickbacks’ to make it appear that an employer paid the wage provided by a 

collective bargaining contract or by a statute, although in fact he paid less[.]” 

(Kerr’s Catering, supra, 57 Cal.2d at p. 328.) Nor is it a device to defraud or 

coerce MWS’s employees into accepting less than their promised wages. (Id. 

at pp. 328-329.) It is not unlawful under section 221.

Because MWS did not take any unlawful deductions under section 221, 

it also did not violate section 223’s prohibition on secretly paying a lower 

wage than required by contract. Indeed, even if it had done so, “that error 

would not amount to ‘secretly pay[ing] a lower wage while purporting to pay 

the wage designated by statute’ ([] § 223), because there was nothing hidden 

or deceptive about defendants’ payment practice.” (Stoetzl v. Department of 

Human Resources (2019) 7 Cal.5th 718, 752.) For the same reasons, MWS 

has not violated sections 201, 202, or 203, which require an employer to pay 

earned wages in full when an employee resigns or is discharged. 

(See Steinhebel, supra, 126 Cal.App.4th at pp. 711-712.) The trial court did 
29

not err by granting MWS’s motion for summary judgment and denying 

Tessitore’s motion.5

5 Tessitore spends a large portion of his briefing attacking the reasoning 

of the trial court in its summary judgment order, particularly its reliance on a 

line of cases considering commission advances. (See, e.g., Steinhebel, supra,

126 Cal.App.4th at p. 704.) But, as noted, we are not bound by the trial 

court’s reasoning and need not consider whether it was correct. (Coral 

Construction, supra, 50 Cal.4th at p. 336; Canales, supra, 23 Cal.App.5th at 

p. 1268.) We agree with Tessitore that MWS does not pay advances on 

commission. Its commission pay is earned when paid. This circumstance is 

not dispositive for reasons we have already discussed. The fact that other 

courts have approved various methods for charging back advance 

commissions does not mean that MWS’s method for calculating earned 

commissions based on net sales (and not charging back previously-paid 

commissions) is unlawful. In light of our conclusion, we need not consider the 

extent to which an employee may authorize deductions from earned wages 

under section 224. (Compare Koehl, supra, 142 Cal.App.4th at pp. 1337-1338 

with City of Oakland v. Hassey (2008) 163 Cal.App.4th 1477, 1500-1501.) We 

also need not consider the parties’ contentions regarding judicial estoppel 

based on prior litigation against MWS. 
30

DISPOSITION

The judgment is affirmed. MWS is entitled to its costs on appeal.

GUERRERO, J.

WE CONCUR:

McCONNELL, P. J.

DO, J.