Sixth District Holds That Hours-Based Compensation, With No Guaranteed Minimum, Is Not a Salary

The Sixth District held on Thursday that an hours-based compensation scheme that failed to guarantee a minimum cannot be considered a salary, and therefore cannot meet the Labor Code's "salary-basis" test.  Negri v. Koning & Associates, No. H037804, __ Cal. App. 4th __ (6th Dist. May 16, 2013).  California Labor Code § 515(a) requires that to be exempt, the employee must earn a "monthly salary equivalent to no less than two times the state minimum wage for full-time employment."

Plaintiff was an insurance claims adjuster who was paid $29 per hour with no minimum guarantee.  Slip Op. at 1.  When he worked more than 40 hours in a week, he was still paid at $29 per hour.  He brought a claim for overtime pay, and the trial court issued a defense verdict, concluding that plaintiff was an exempt employee.  Id. at 3.

Defendant argued that plaintiff was properly classified as exempt because plaintiff's workload was not subject to reduction or variation, and he worked substantially the same number of hours each week of his employment.  The Court of Appeal disagreed:

The problem here is that defendant stipulated to the fact that it “never paid [plaintiff] a guaranteed salary”; if he worked fewer claims “he made less money than if he worked more claims.” That is the same thing as saying that plaintiff was not paid “a predetermined amount” that “was not subject to reduction based upon the quantity of work performed.” He was not paid a salary. For that reason, defendant did not prove that the administrative exemption of Wage Order 4 applies in this case.

Slip Op. at 8-9.