Koehl v. Verio, Inc., 2006 WL 2615515 (Cal. Ct. App. 2006)

Jeffrey Koehl, et al., worked as sales associates for Verio, an Internet service provider. Sales associates earned base salaries of between $40,000 and $75,000 plus commissions based on their sales volumes. If a customer cancelled an installation order before paying for the first three months of service, Verio would recover the commission payments it had previously advanced to the sales associate involved in the transaction. The sales associates challenged Verio’s chargeback practice as a violation of the California Labor Code and of the Unfair Competition Law. Following a bench trial, the trial court entered judgment in favor of Verio, concluding that the chargebacks did not violate California law because the commission advances were not wages. The Court of Appeal affirmed, relying principally upon Steinhebel v. Los Angeles Times Communications, 126 Cal. App. 4th 696 (2005).