Averaging An Employee’s Wages Is NOT Permitted Under California Law to Determine Whether the Employer is Satisfying California’s Minimum Wage Requirement
Unlike federal law, California workers must receive the minimum wage (currently $8.00 per hour) for each hour worked during the payroll period, even if the agreed upon compensation exceeds the minimum wage for the total hours worked. “The averaging method utilized by the federal courts for assessing a violation of the federal minimum wage law does not apply here.” Armenta v. Osmose, Inc., 135 Cal. App. 4th 314, 323 (2005). Labor Code sections 221, 222, and 223 (unlike federal law) “articulate the principal that all hours must be paid at the statutory or agreed rate and no part of this rate may be used as a credit against a minimum wage obligation.” Armenta, 135 Cal. App. 4th at 323.
Accordingly, Employers are required to pay their employees the minimum wage for each hour worked during each payroll period. Indeed, even if the employee is making good money (i.e., $50-70 thousand annually), employers can still violate California’s minimum wage requirement.
This often becomes an issue for employers when their employees are paid solely on a commission basis because there is no per se hourly rate to track. Rather, commissions are generally based upon a percentage of the product or service sold or based upon some other similar formula. In this case, employers should take heed to ensure its employees are in fact making the minimum wage for every hour worked. One such way to cross-check is to simply take the employees gross pay for a given pay period and divide it by the number of hours worked by the employee in that same period. The result is the rate per hour.
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