We have been getting a number of calls as to any update regarding this very serious matter concerning not only technicians but anyone who pays on a commission or by piece rate basis. Here it is directly from the “horse’s mouth!”
Gonzalez v. Downtown LA Motors. Co-counsel for this dealership have filed a petition asking the California Supreme Court to review the decision of the court of appeal which held that dealers must pay service technicians minimum hourly wages for any hour or part of any hour when they are not working on a piece rate (flag hour) task. Amicus (friend of the court) letters asking the Court to hear the case have been filed by major trade associations, including the U.S. Chamber of Commerce, the National Retail Federation, the National Trucking Association, the California Chamber of Commerce, the Western Growers Association, The Employers Group, California Employment Law Council, and, of course, the California New Car Dealers Association. At least two plaintiffs’ lawyers group and a law firm representing labor unions will likely oppose the petition. The dealers’ position, in summary, is that piece rate and commission pay is embodied in the definition of “wages” in the Labor Code and that, when flat rate pay exceeds minimum wage, that pay covers all hours worked in the payroll period. That has been the understanding of the Legislature, the Industrial Welfare Commission, the State Labor Commissioner, and the courts for almost 100 years.
Some dealers have considered converting service technicians to hour pay and paying an additional bonus. If so, the bonus and the hourly pay in the payroll period must be added together and divided by the number of hours worked to determine the regular rate of pay for purposes of overtime.
The risk of back pay liability does not go away if a dealer converts to hourly pay, but the statute of limitations diminishes exposure day-by-day. Art Silbergeld (310) 772-8308, who is experienced in defending such claims and co-counsel on the appeal, has prepared a legal form to stay any related class action litigation while the Supreme Court ponders whether to review Gonzalez.
In the meantime, a federal district court in San Diego has applied the same legal theory used in Gonzalez to sales personnel at Nordstrom: when they are not directly involved in sales activities (for example, when they are stocking shelves or waiting for customers), they must be paid an hourly minimum wage even if their sales commissions in the payroll period far exceed minimum wage. An interim appeal to the Ninth Circuit has been filed. If not overturned, the rationale of the decision would require car dealers to pay sales personnel both a commission and an hourly wage.
Arthur F. Silbergeld
Dickstein Shapiro LLP
2049 Century Park East, Suite 700 | Los Angeles , CA 90067
Tel (310) 772-8308 | Fax (310) 772-8301