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II. JUDICIAL UPDATES The California Court of Appeal recently decided Harris v. Investor’s Business Daily, Inc., a wage-and-hour class action suit in which telemarketers (the “Employees”) who sold newspaper subscriptions alleged violations of federal and state laws requiring the payment of overtime. At the trial court level, the newspaper publisher (the “Employer”) successfully obtained summary adjudication of its claim that it was not required to pay overtime wages under California law because the telemarketers were subject to the commission exemption. However, the appellate court reversed, noting that that the Employer failed to satisfy its burden of proof on that issue. For the exemption to apply, the employees must be involved in selling a product or service and the amount of compensation must be a percent of the price of the product or service. The Employer paid the Employees on a point system that was based on the number of points earned. The Employees received certain numbers of points based on the types of subscription sold. They also earned points for winning sales contests, and received fixed monetary bonuses if they sold a specified number of points at certain levels. Importantly, the point values were not tied to the price of the subscription sold. On these facts, the Court of Appeal concluded that the point system did not constitute commission payments for purposes of the exemption. The court found that the Employer failed to meet its burdens of demonstrating that (1) more than half of the Employees’ compensation was from commissions, and (2) the Employees’ total compensation was more than one and one-half times the minimum wage. This case illustrates the importance of ensuring that a commissioned employee is classified as exempt based on the commission exemption only where that exemption’s specific requirements are all satisfied.
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