Treatment Of Commissioned Workers Under Overtime Law

Many employers mistakenly believe that all commissioned employees are not entitled to overtime pay.  That belief is wrong and can get employers in a lot of trouble.

It’s true that some retail sales employees are exempt from overtime pay, but these exemptions require specific compliance with certain requirements.  The classic example is the case of automobile dealerships, where sales personnel are exempt from the overtime pay requirement.  Yet, this exemption is not absolute.  There are certain requirements that must be met.  Additionally, with respect to automobile salespersons, they must be paid at least the minimum wage for all hours that they work, regardless of whether or not they make a sale.

Typically, automobile salespersons are paid a set “draw” which is usually based on working forty hours per week at the minimum wage or slightly above the minimum wage.  Problems arise if the salesperson either works more than forty hours per week or does not sell any automobiles.  The problem is compounded if the salesperson works more than forty hours per week and does not sell any automobiles.  The salesperson receives the draw, but does not receive any compensation for work performed over forty hours per week.

Another exemption for commissioned salespersons is the retail sales exemption.  Typically, salespersons in a retail establishment are not entitled to an overtime premium.  However, in order to qualify for the exemption, the following requirements must be met:  (1) the employer must be a retail establishment, with 75% of the annual sales being retail sales; (2) the employee’s regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked; and (3) more than half of the employee’s compensation must be in the form of commissions.  If any of those requirements are not met, then the employer does not qualify for the retail sales exemption and an overtime premium must be paid for all hours worked over forty per week.

Overtime cases involving commissioned workers require analysis of federal statutes, U.S. Department of Labor regulations, and court decisions.  I can help you with any employment law or labor law questions that you might have.  Please feel free to contact me for a free initial consultation about employment law or labor law.


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