Investor's Business Daily, Inc.

Investor's Business Daily, Inc. publishes a financial newspaper, Investor's Business Daily. Plaintiffs worked as sales agents to sell subscriptions to the newspaper. They were given lists of current subscribers and they sat in a room making phone calls, trying to make sales. If an Agent sold a subscription that the subscriber kept for at least 16 weeks, the Agent got a commission. If not, the Agent got no commission. Commissions were advanced to Agents at the time of sale and then would be charged back against future commissions if the subscription was cancelled during the 16 weeks.

Plaintiffs filed a class action against IBD claiming that they were subject to illegal deductions from wages by charging back advanced commissions if a subscription was canceled within the first 16 weeks. Plaintiffs claim this practice was a per se violation of California Labor Code §221 which prohibits employers from taking deductions from employee wages for cash shortages, breakage, or loss of equipment.

Defendants contended that advancing and charging back commissions is not unlawful. The practice of advancing commissions to sales people and then charging back against future commissions if the company does not collect the money for the sale, or the goods are returned, is an extremely common practice. If employers could not advance commissions, then sales people might have to wait months for the company to collect the money for the sale before receiving their commissions.

Defendants, represented by Belle Mason of the law firm Silver & Freedman, prevailed in a summary judgment motion because the court found that the practice of charging back commissions was not a violation of Labor Code §221 since this did not involve cash shortages, breakage, or loss of equipment. Upon winning the motion the Defendants were awarded attorney's fees against the plaintiffs in the sum of $528,483.50 plus costs in the sum of $20,005.00 for a total of $548,488.50.

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