Opinion ID: 1133701
Heading Depth: 2
Heading Rank: 3

Heading: Ramirez as a Commissioned Employee

Text: Wage Order No. 7-80, subdivision 3(c) and its successor, Wage Order No. 7-98, subdivision 3(B), state that [p]rovisions of [overtime compensation] shall not apply to any employee whose earnings exceed one and one-half (1½) times the minimum wage, if more than half (½) of that employee's compensation represents commissions. As discussed above, the trial court found not only that Ramirez was an outside salesperson but also that he was compensated primarily through commissions within the meaning of this wage order. Therefore, for that independent reason, the court found he should be exempt from the overtime statute. There would be no need to remand this case if we agreed with the trial court that Ramirez was a commissioned employee. The IWC wage order does not define the term commission, but its meaning is set forth in Labor Code section 204.1 as follows: 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. Although section 204.1 applies specifically to employees of vehicle dealers, both parties contend, and we agree, that the statute's definition of commission is more generally applicable. In interpreting this language, the Court of Appeal in Keyes Motors, Inc. v. Division Labor Standards Enforcement (1987) 197 Cal.App.3d 557, 563, 242 Cal.Rptr. 873, stated: We conclude Labor Code section 204.1 sets up two requirements, both of which must be met before a compensation scheme is deemed to constitute `commission wages.' First, the employees must be involved principally in selling a product or service, not making the product or rendering the service. Second, the amount of their compensation must be a percent of the price of the product or service. (Italics omitted.) Ramirez was compensated at a flat rate of $1,200-$1400 per month, plus a percentage of the price of the bottles of water and related products sold when sales exceeded the flat rate. The parties dispute whether or not the $1,200-$1,400 sum represented a draw against future bottle sales, or was more in the nature of a salary. But regardless of which it was, and regardless of whether Ramirez's compensation could be characterized as a percentage of the price of the product or service, it is not at all clear that the first condition set forth by the Keyes court was met. As discussed above, it remains to be clarified on remand whether Ramirez was involved principally in selling the product or service. Because our determination of whether Ramirez was a commissioned employee depends partly on matters to be decided by the trial court on remand, we believe this question is also best resolved on remand.