PEABODY v. TIME WARNER CABLEUnited States Court of Appeals for the Ninth Circuit’s Request to Answer Question of State LawCal.August 20, 2012 S204804 PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT SusAN J. PEaBopy, Plaintiff-Appellant, V. TIME WARNER CABLE, INC., D dant-Appellee. SUPREME COURT40" Appellee FILED AUG 2 0 2012 Frank A. McGuire Clerk DPanuty NSae No. 10-56846 D.C. No. 2:09-cv-06485-AG- RNB 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 certifies to the Supreme Court of California that, in this case, there are questions concerning the law of California which are Ninth Circuit, having heard the above-entitled case, hereby determinative of the case and on whichthere 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) 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 Warmer 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 werepaid, 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 overcertain 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). ‘Thefifth issue Peabody raised regarding unpaid commissions wasnot related to the first four issues. Thus, the issue is not includedin this order. It has been resolved by a Memorandum Disposition filed concurrently herewith. PEABODY Vv. TIME WARNER CABLE 9439 Il. 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 wasnot 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. Peabodytestified 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 TWCeffective 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 whoheld 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.” [WC 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.Jd. § 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.” [WC 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 wageat all relevant times, and she also contends that her earnings did not exceed the required minimum wageat 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 Vv. 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 payperi- ods,” 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, TWCis 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 commissionat the end of every broadcast month. Under, TWC’sproposed 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 ?This amountreflects 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 Peabodyeasily qualified for the exemption underthis 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 Novemberof 2008, and March 2009. This commission wasin 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 vy. 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 Manualis 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 Vv. 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 numberof 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 deemedthe 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. PRINTED FOR ADMINISTRATIVE OFFICE--U.S. COURTS BY THOMSON REUTERS- -SAN FRANCISCO The summary, which does not constitute a part of the opinion of the court, is copyrighted © 2012 Thomson Reuters.
