You are a commissioned employee if you receive a sum of money from your employer upon completion of a task. This is common in sales, when employees receive a commission for selling a specified amount of goods or services. Commissions can be an incentive or they can be the only source of income employees rely on. In other words, commissioned employees can receive this payment in addition to a salary, or in lieu of it. The Fair Labor Standards Act (FLSA) does not require employers to provide their employees with a commission.
Some retail employees who are paid a commission (either in whole or in part) are exempt from overtime pay per the FLSA. It is important for employers to properly classify their employees so no one is unduly characterized as exempt from overtime pay when, in reality, they are not.
Exemptions for Retail Commissioned Employees
The exemption from overtime for commissioned employees applies here to employees who work for a retail establishment. The FLSA says, “Retail and service establishments are defined as establishments 75% of whose annual dollar volume of sales of goods or services (or of both) is not for resale and is recognized as retail sales or services in the particular industry.”
Retail employers who wish to use the overtime exemptions for employees they pay on a commission must make sure that the following three criteria are met, or the exemption does not apply.
- The exempt individual is an employee of a retail or service establishment, as defined by the FLSA
- The exempt employee’s regular rate of pay is more than 1.5x the minimum wage for every hour that they work in a week where overtime hours are worked
- More than 50% of the exempt employee’s earnings are comprised of commissions
*IMPORTANT. If your employer is classifying you as exempt from overtime, but you know that you do not meet these three requirements, we encourage you to contact our Houston overtime lawyers to learn your rights!
Sources
