Dive Brief:
- Sprint has agreed to pay $4 million to a class of 2,290 former retail employees to settle allegations that it made illegal deductions from their commission payments, in violation of California law; the employees also alleged derivative claims for wage statement penalties, waiting time penalties and civil penalties (Caudle, et. al v. Sprint/United Management Company, No. 17-cv-06874 (N.D. Calif. May 16, 2019)). Each class member will receive 100% of the deducted wages, as well as extra in interest and penalties.
- Sprint used a "Sprint Promoter Score (SPS) Adjustment" to reduce employees' commissions by 10% when a retail store location did not meet its monthly target SPS, which was based on results from customer surveys. The plaintiffs claimed these adjustments constituted illegal wage deductions under state law because, among other things, they were based on factors beyond the employees' control and were not tied to the transactions that earned the commissions.
- The SPS Adjustment, according to Sprint, was simply one factor involved in calculating commissions, rather than a deduction from previously earned wages; additionally, the employees had agreed to it under the explicit terms of their compensation plans. Sprint did not admit liability as part of the settlement.
Dive Insight:
While it was not clear in this case whether the workers' commissions actually constituted earned wages, the case is a good reminder that deductions from pay can be legally problematic. A Las Vegas hospital recently got in trouble for automatically deducting break time pay, as did a nursing home in Alabama.
Additionally, even when performance-based pay programs are correctly administered, they can make workers anxious. A recent study of more than 300,000 workers in Denmark found an increased likelihood that workers would use medication for anxiety and depression when their organizations moved to a pay-for-performance system. On the flip side, a higher level of base pay has been shown to help retain millennial workers.
Calls for pay transparency are on the rise, prompting employers to re-examine their pay structures to find inequities and balance problems. Fifty-three percent of employers said they plan to make their pay decisions more transparent within the next three years, a 2018 Willis Towers Watson poll revealed. To do so, companies have put more formal processes in place to ensure ease of that transparency and access to data where required.
