Wednesday, June 29, 2011

Commissions, Minimum Wage and Overtime: What You Need to Know

A common scenario we encounter is as follows: a person is paid entirely or substantially on commissions.  They are deemed exempt from overtime by their employer.  Although they work more than 40 hours per week, they do not get paid overtime.  In some scenarios, they do not make enough in commissions to make even minimum wage. 

Some common areas we see this in: sales positions; wait staff.

For sales positions, employers often (incorrectly) deem employees to be exempt "outside salespersons," when in fact most of their work is performed in an office (whether a home office or one provided by the employer).  Such "inside sales" jobs are not exempt from the FLSA's overtime provisions.  If you perform such sales, you are entitled to both the minimum wage and overtime on all hours worked in excess of 40 in a given week.

Here are some important things to keep in mind:  If you are truly exempt from receiving overtime pay, then you are not required to be paid a minimum wage.  However, if you are not exempt from receiving overtime (and this is governed by the law, not by your employer's choice), then you must be paid the minimum wage.

That is so because the Fair Labor Standards Act ("FLSA") requires a covered employer to pay all non-exempt employees minimum wage for all hours worked and overtime compensation at one and one-half times the regular rate of pay for all hours exceeding 40 hours per workweek. 29 U.S.C. §§ 206(a)(1), 207(a)(2)  

In addition, if you are not truly exempt, then you must be paid overtime.

How do you determine whether you are being paid minimum wage?  Right now, the minimum wage in Pennsylvania is $7.25 (as it was in 2009 as well; in 2008, it was $7.15).  Add up the commissions you earn each week and divide by how many hours you actually worked during the week in question.  If the product of that equation is less than $7.25, you are owed the difference between the product and $7.25 for the first 40 hours tyou worked during the week in question.

For that same week, if you in fact worked more than 40 hours, you would be entitled to overtime pay at a rate of 1.5 x $7.25 (the minimum wage), or $10.88 per hour over 40.

Importantly, if you seek payment of a minimum wage or overtime from your employer, you are protected from termination pursuant to the anti-retaliation provisions of the FLSA. 

Click Here to read more about the FLSA

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