Litigating California Wage & Hour and Labor Code Class Actions

writing acknowledged by each employee. Unlike Steinhebel, however, the
compensation plan did not refer to the original payment as an “advance,” although it
did state expressly that the commission was not “earned” until the customer made
three months of payments on the contract. The Koehl court held that, as long as the
plan made clear that the commission was not earned until a later condition was
satisfied, it made no difference whether the payment was labeled a “commission” or
an “advance.” 79 The court further noted that this conclusion was entirely consistent
with Harris, which merely held that, in the absence of a writing memorializing the
parties’ agreement, a material dispute between the employer and employee as to
when the commission was “earned” made summary judgment of the Section 221
claim inappropriate. 80
Koehl actually went further than Steinhebel in two respects. Steinhebel ended the
chargeback inquiry at whether the chargebacks at issue violated Section 221. Koehl
went further by affirming the judgment in the defendant’s favor on a separate,
alternative basis—i.e., that even if the chargeback violated Section 221, it was
nonetheless saved by an exception to Section 221 set forth in Labor Code Section
224. 81 Koehl also went beyond Steinhebel in holding that the doctrine of
unconscionability did not invalidate the chargeback system. 82
Section 224 provides, in relevant part, that Section 221 “shall in no way make it
unlawful for an employer to withhold or divert any portion of an employee’s wages
when . . . a deduction is expressly authorized in writing by the employee to cover . . .
deductions not amounting to a rebate or deduction from the standard wage.”
Although Steinhebel took note of Labor Code Section 224, it did not rely on it to
support the holding that the chargeback there was lawful. 83 By contrast, Koehl held
that Section 224 rendered the chargeback system at issue lawful even if it otherwise
violated Section 221. 84
To support that conclusion, the court interpreted Section 224 as saving a chargeback
system where (1) the chargeback is authorized in writing; and (2) the compensation
system includes base pay (i.e., a “standard wage”) that is not subject to the
chargeback. 85 If that is indeed the proper meaning of “standard wage,” then
79
80
81
82
83
84
85
Id. at 1334.
Id.
Id. at 1337-38.
Id. at 1338-40.
Steinhebel, 126 Cal. App. 4th at 707.
Koehl, 142 Cal. App. 4th at 1337-38.
Id.
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