Deleon, a former retail sales representative for Verizon Wireless, filed suit on behalf of himself and other aggrieved employees seeking civil penalties under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) for violation of Labor Code section 223, which prohibits the secret underpayment of wages.
Deleon’s compensation plan included commission payments, which Verizon could recover (or “charge back”) against future commissions, if certain conditions were not met. That is, commissions would be paid in advance, but not earned until the expiration of a chargeback period during which a customer could cancel the service. If the customer canceled the service during the chargeback period, Verizon could recover the commission already paid out. At issue was whether such a chargeback provision violated section 223 by “secretly pay[ing] a lower wage while purporting to pay the wage designated by statute or contract.” It did not.
The court held that Verizon could legally advance commission payments to its retail sales representatives before completion of all conditions for payment (these payments were advances, not wages), and charge back any excess advance over commissions earned against future advances should the conditions not be satisfied.