Court Opinion

ID: 806879
Source: CourtListenerOpinion
Date Created: 2012-08-17 17:01:49+00
Date Added: 2024-06-11T09:16:40.895346
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

SUSAN J. PEABODY,                               No. 10-56846
               Plaintiff-Appellant,                D.C. No.
               v.                             2:09-cv-06485-AG-
TIME WARNER CABLE, INC.,                             RNB
              Defendant-Appellee.              Central District of
                                                  California,
                                                Los Angeles
                                                   ORDER
                                               CERTIFYING A
                                                QUESTION TO
                                               THE SUPREME
                                                 COURT OF
                                               CALIFORNIA

                      Filed August 17, 2012

      Before: Richard C. Tallman and N. Randy Smith,
  Circuit Judges, and Timothy M. Burgess, District Judge.*

                             ORDER

   This panel of the United States Court of Appeals for the
Ninth Circuit, having heard the above-entitled case, hereby
certifies to the Supreme Court of California that, in this case,
there are questions concerning the law of California which are
determinative of the case and on which there is no clear con-
trolling precedent in the California judicial decisions. We

   *The Honorable Timothy M. Burgess, District Judge for the U.S. Dis-
trict Court for Alaska, sitting by designation.

                                9437
9438                PEABODY v. TIME WARNER CABLE
therefore respectfully request that the Supreme Court of Cali-
fornia answer the certified question presented below.

  I.    Question Certified

   In this case, Peabody appeals four issues:1 1) whether Pea-
body qualified for the commissions paid exemption of Section
3(D) of Wage Order 4-2001; 2) whether Peabody was owed
additional minimum wage payments under Wage Order 4-
2001 4(B); 3) whether Time Warner Cable, Inc. (“TWC”) was
exempt from providing wage statements under California
Labor Code Section 226(a); and 4) whether TWC owes Pea-
body any late wage payments under California Labor Code
Section 203. However, the underlying question of whether
Peabody’s commissions can be allocated over the course of a
month, or whether the commissions must only be counted
towards the pay period in which the commissions were paid,
resolves all of these four issues.

  Therefore, pursuant to Rule 8.548 of the California Rules
of Court, we request that the Court answer the following
question:

       To satisfy California’s compensation requirements,
       whether an employer can average an employee’s
       commission payments over certain pay periods when
       it is equitable and reasonable for the employer to do
       so.

In response to the question listed above, the Supreme Court
of California shall not be bound by the manner in which the
question has been phrased by this court. Cal. R. Ct.
8.548(f)(5). We agree to accept and follow the court’s deci-
sion. Cal. R. Ct. 8.548(b)(2).
  1
    The fifth issue Peabody raised regarding unpaid commissions was not
related to the first four issues. Thus, the issue is not included in this order.
It has been resolved by a Memorandum Disposition filed concurrently
herewith.
                PEABODY v. TIME WARNER CABLE              9439
  II.    Statement of Facts

   Susan Peabody was employed by TWC as an Account
Executive in the Media Sales Department between July 15,
2008, and May 15, 2009. Peabody worked for TWC for only
ten months and was not hired for any specific term. Peabody
was a commissioned salesperson who was responsible for
selling advertising on TWC’s various cable channels. Pea-
body’s commissions were based on the revenue generated by
advertising aired every broadcast month, which lasted four or
five weeks. Peabody also received a base salary of $20,000
per year. Peabody testified that she generally worked 45 hours
per week. Peabody received biweekly payments from TWC.
These pay stubs did not include the numbers of hours Pea-
body worked.

  Peabody resigned from TWC effective May 15, 2009. Dur-
ing Peabody’s ten months of employment, she was paid
nearly $75,000 in total compensation.

   Peabody brought a putative class action in California state
court against TWC on behalf of current and former employees
of TWC who held the position of “account executive.” Pea-
body alleged violations of California’s wage and overtime
laws. The case was removed to federal court pursuant to the
jurisdictional provisions of the Class Action Fairness Act, 28
U.S.C. § 1332(d). TWC and Peabody stipulated to decide the
dispositive motion for summary judgment prior to determina-
tion of class certification. The district court granted summary
judgment in favor of TWC, and Peabody now appeals.

  III.   Explanation of Certification

   This request satisfies the requirements of Rule 8.548(a) of
the California Rules of Court, because there is no controlling
California precedent explaining how commissions should be
allocated, and this question will determine the remaining
issues Peabody raised in her appeal.
9440           PEABODY v. TIME WARNER CABLE
   Generally, under California Labor Code Section 510, an
employer is required to pay overtime to an employee who
works more than 40 hours per week. Similarly, Section 4(B)
of IWC Wage Order 4-2001 requires that “[e]very employer
shall pay to each employee, on the established payday for the
period involved, not less than the applicable minimum wage
for all hours worked in the payroll period, whether the remu-
neration is measured by time, piece, commission, or other-
wise.” IWC Wage Order 4-2001, Cal. Code Regs. tit. 8,
§ 11040 4(B) (emphasis added). In addition, this Wage Order
requires that employers pay employees overtime pay at the
rate of one and one half times the regular pay for all hours
worked over 40 hours in a workweek. Id. § 11040 3(A). Cali-
fornia Labor Code Section 203(a) imposes penalties for any
employer that “willfully fails to pay” wages of an employee
who quits.

   However, Section 3(D) of the IWC’s Wage Order 4-2001
creates an exemption from the overtime requirements for
employees paid through commission. This exemption pro-
vides that “[t]he [overtime] provisions of subsections (A), (B)
and (C) above shall not apply to any employee whose earn-
ings exceed one and one-half (1 1/2) times the minimum wage
if more than half of that employee’s compensation represents
commissions.” IWC Wage Order 4-2001, Cal. Code Regs. tit.
8, § 11040 3(D). California Labor Code Section 226(a)(2)
also requires an employer to provide detailed wage statements
unless an employee is exempt from overtime pay.

  Peabody contends that her earnings did not exceed one and
one-half times the minimum wage at all relevant times, and
she also contends that her earnings did not exceed the
required minimum wage at all times. During the time that
Peabody was employed, the relevant minimum wage was
$8.00 per hour. Therefore, Peabody’s earnings needed to
exceed $12.00 per hour for her to qualify for the commissions
paid exemption, and Peabody testified that she generally
worked about 45 hours per week.
                  PEABODY v. TIME WARNER CABLE                      9441
   The analysis hinges on how Peabody’s commission can be
calculated and allocated over pay periods. Peabody argues
that, for all of California’s compensation requirements, the
minimum wage threshold must be earned within each work-
week and paid within the corresponding pay period for which
the exemption is claimed. Under this calculation, Peabody
received only $769.23 in the majority of her biweekly pay peri-
ods,2 because Peabody received her large monthly commis-
sion in only about half of the pay periods. Dividing the
$769.23 amount by 45 hours for two weeks, Peabody’s pay
would reflect only $8.55 per hour for that pay period, which
is insufficient to qualify for the commissions paid exemption.
Peabody therefore argues that, while she qualified for the
commissions paid exemption in the pay periods when she was
paid her commission, TWC is unable to claim the exemption
for the workweeks in which Section 3(D)’s minimum wage
requirement was not met.

   On the other hand, TWC argues that Peabody’s earnings
should be calculated based on the broadcast month (which
ended every four or five weeks), so that Peabody’s commis-
sions count towards the pay period for which they were
earned rather than the actual pay period in which the commis-
sions were paid. Peabody received a large commission at the
end of every broadcast month. Under, TWC’s proposed calcu-
lation method, a pay period of four weeks multiplied by 45
hours per week and divided by $12.00 per hour would result
in a requirement that Peabody earn over $2,160 to qualify for
the commissions paid exemption. For a pay period of five
  2
    This amount reflects Peabody’s biweekly payment for her base salary
of $20,000 per year. California law presumes that salary compensation is
only intended to cover 40 hours in a regular workweek, unless the
employer and employee explicitly agree otherwise. See Cal. Lab. Code
§ 515(d); Arechiga v. Dolores Press, Inc., 192 Cal. App. 4th 567 (Ct. App.
2011). No such agreement was provided to Peabody here. Thus, if TWC
is unable to average commission payments, Peabody may also be able to
assert minimum wage violations for hours Peabody worked beyond the
normal 40-hour workweek.
9442           PEABODY v. TIME WARNER CABLE
weeks, Peabody needed to earn over $2,700. TWC’s compen-
sation table demonstrates that Peabody easily qualified for the
exemption under this calculation method. The lowest commis-
sion amount Peabody received for any broadcast month was
$3,195.49, and the highest commission she received was
$13,288.09. The only months where the broadcasting month
was five weeks, rather than four weeks, were August and
November of 2008, and March 2009. This commission was in
addition to Peabody’s annual base salary of $20,000.

   There is no California case directly on point that explains
how commission payments should be allocated over pay peri-
ods to determine whether an employee qualifies for California
compensation requirements. The only authority on point
appears to be the 2002 Updated Enforcement Policies and
Interpretations Manual written by the Division of Labor Stan-
dards Enforcement (“DLSE Manual”) or analogous federal
law interpreting the Fair Labor Standards Act (“FLSA”).
However, the Supreme Court of California has said that this
DSLE Manual is “void and not entitled to any deference”
because it was not passed in accordance with California’s
Administrative Procedure Act (“APA”). Tidewater Marine
W., Inc. v. Bradshaw, 927 P.2d 296, 308 (Cal. 1996); see also
Morillion v. Royal Packing Co., 995 P.2d 139, 151 (Cal.
2000) (same). But see Gomez v. Lincare, Inc., 93 Cal. Rptr.
3d 388, 396 n.6 (Ct. App. 2009) (“Although not controlling,
the DLSE’s interpretation of the motor carrier exemption in
the Enforcement Manual is instructive.”). It is also not clear
whether courts may look to federal law under the FLSA to
determine how commission payments should be allocated.
Compare Morillion, 995 P.2d at 150 n.8, 151 (concluding that
it was error for a court to rely on federal authority under the
FLSA to construe a wage order if such an interpretation
“provid[es] less protection to state employees”), with In re
United Parcel Serv. Wage & Hour Cases, 118 Cal. Rptr. 3d
834, 843 (Ct. App. 2010) (determining that “[f]ederal law
interpreting similar components of the FLSA exemptions is
                PEABODY v. TIME WARNER CABLE                9443
properly considered as persuasive authority, even if not bind-
ing on this court” for a different wage order).

   Because of the complexity of these state law issues and
because of their significant policy implications that will effect
many employers and employees throughout California, we
believe that the Supreme Court of California, which has not
yet interpreted the relevant provisions of the California Labor
Code, “is better qualified to answer the certified question in
the first instance.” See Parents Involved in Cmty. Sch. v. Seat-
tle Sch. Dist. No. 1, 294 F.3d 1085, 1092 (9th Cir. 2002).

  IV.   Administrative Information

  The title and number of the case is as follows: Peabody v.
Time Warner Cable, Inc., Case No. 10-56846.

   The names and addresses of counsel for the parties are as
follows:

    Brian F. Van Vleck, Van Vleck Turner & Zaller
    LLP, 6310 San Vicente Blvd., Suite 430, Los Ange-
    les, CA 90048, for Appellant

    J. Scott Carr, Wargo & French LLP, 999 Peachtree
    Street, NE, 26th Floor, Atlanta, Georgia 30309, for
    Appellee

See Cal. R. Ct. 8.548(b)(1). If the Supreme Court of Califor-
nia accepts this request, the Plaintiff-Appellant (Peabody)
should be deemed the petitioner.

   The Clerk of the Court is hereby directed to immediately
transmit to the Supreme Court of California, under official
seal of the Ninth Circuit, an original and ten copies of this
order and request for certification, a certificate of service on
the parties, and all relevant briefs and excerpts of record pur-
suant to California Rules of Court 8.548(c)-(d). The Clerk
9444            PEABODY v. TIME WARNER CABLE
shall provide additional record materials if so requested by the
Supreme Court of California. Cal. R. Ct. 8.548(c).

   The case is withdrawn from submission, and further pro-
ceedings in this court are stayed pending final action by the
Supreme Court of California. The parties shall notify the
Clerk of this Court within seven days after the Court accepts
or rejects certification, and again within seven days if the
Court renders an opinion. The panel retains jurisdiction over
further proceedings.

  IT IS SO ORDERED.