Best Ohio Overtime Pay Attorney Answer: Can I get overtime if I am paid a commission? Does my job owe me more money if I’m not making enough commission? What are the overtime laws if I am paid a combination of an hourly rate and a commission?
At Spitz, The Employee’s Law Firm, our wage theft lawyers are always staying on top of the latest wage and hour legal developments. (See Can Minors Be Paid Below Minimum Wage? – Call The Right Attorney; How Do The New Overtime Rules Help Me?; How Do The New Overtime Rules Help Me?; Should Tipped Workers Be Paid Overtime?; and Should Tipped Workers Be Paid Overtime?). Our overtime lawyers often hear from commissioned employees who work well over forty hours a week, and do not receive overtime pay. Is this legal? While our wage and hour lawyers have addressed this before, it is an issue that keeps coming up and we like to keep our wage and hour blog up to date. (See I’m A Commissioned Employee. Am I Entitled To Overtime?; Top Lawyer Answer: Do I Get Overtime If I’m Paid Commission?; and Are Commissioned Sales People Exempt From Overtime Pay Laws?)
The answer to whether commissioned employees should get paid overtime for working over 40 hours in a work week is actually quite complicated. Fair Labor Standards Act (“FLSA“) contains two exemptions from its overtime requirement for commissioned employees: the “outside sales” exemption, and the “commissioned retail employee” exemption. Under the outside sales exemption, the employee’s primary duty must be the sale of goods or services, and, as the title of this exemption suggest, they must be primarily engaged away, or outside of, the employer’s place of business. According to the Department of Labor (“DOL“), the “employer’s place of business” can constitute “any fixed site, whether home or office, used by a salesperson as a headquarters or for telephonic solicitation of sales… even though the employer is not in any formal sense the owner or tenant of the property.” So, a salesperson who maintains an office at the employer’s facility is unlikely to be exempt. Unlike several other exemptions, there is no minimum weekly wage requirement for outside sales people.
Commissioned retail employees are an entirely different ball game. The requirements here require a detailed analysis, right down to whether the employer is a “retail establishment” within the meaning of the law, and whether what the employer calls “commissions” are actual “commissions,” and whether the employee is paid time and a half for the current minimum wage rate for all hours worked. Finally, the employee in question must derive more than half of their compensation from commissions earned from the sale of goods or services. Simple, right? No, not really.
First, what is a retail establishment? The FLSA defines it as:
A retail establishment is an establishment 75% of whose annual dollar volume of sales is not for resale and is recognized as retail in the particular industry.
Typically a retail or service establishment is one which sells goods or services to the general public. It serves the everyday needs of the community in which it is located. The retail or service establishment performs a function in the business organization of the Nation which is at the very end of the stream of distribution, disposing in small quantities of the products and skills of such organization and does not take part in the manufacturing process. Such an establishment sells to the general public its food and drink. It sells to such public its clothing and its furniture, its automobiles, its radios and refrigerators, its coal and its lumber, and other goods, and performs incidental services on such goods when necessary. It provides the general public its repair services and other services for the comfort and convenience of such public in the course of its daily living.
Next, the employee must be paid “commissions” as that term is defined by the FLSA. According to the DOL, for a commission payment to truly qualify as a commission, “an increase in the costs to the consumer must result in a corresponding increase to the amount of payment made to the employee.” That is, the rate of commission must have some relationship to the amount the customer pays. This usually translates to a fixed percentage of revenues earned. However, employers often get in trouble when they try to take advantage of this exemption while paying their employees a “flat rate” regardless of what the customer pays.
By way of example, if garage A pays its mechanics a fixed hourly rate for each hour a book says a certain automotive repair is supposed to take (a “flag hour”), regardless of how long it actually takes the mechanic to complete the job, this is a violation because the flat hourly rate bears no relationship to what the customer paid for the job. However, if garage B does the same thing, but pays the employee a percentage of what the customer pays rather than an hourly rate, then the employee will likely fall into the exemption.
Another requirement employers often run afoul of is the requirement that retail commissioned employees be paid at least the time and a half rate the minimum wage for all hours worked (assuming that employee works more than forty hours a week.) Based on the current federal minimum wage of $7.25 per hour, that equates to at least 10.90 per hour for all hours worked. Under Ohio’s minimum wage of $8.10, the rate increases to $12.15 per hour.
Finally, the employee must earn more than half of their wages from commissions to qualify for this exemption. If an employee earns less than half of their income from commissions, the employer must combine the employee’s hourly rate and weekly commissions to determine what the employee’s regular rate of pay is, and then determine the time and a half rate based on that figure.
If you believe that your employer is not paying you all of your wages for all of your lawfully earned overtime compensation at a rate of one and half times your normal wages as requires under the Federal Fair Labor Standards Act or Ohio Minimum Fair Wage Standards laws or you are an nonexempt employee that has been misclassified as exempt or independent contractor, contact the attorneys at Spitz, The Employee’s Law Firm today for a free and confidential initial consultation. The wage and hour lawyers at Spitz, The Employee’s Law Firm will provide you with the best options for your overtime pay dispute situation. If you even think that you may be entitled to overtime pay that you are not being paid, call 866-797-6040.
The materials available at the top of this overtime, wage and hour web page and at this employment law website are for informational purposes only and not for the purpose of providing legal advice. If you are still asking, “Am I entitled to overtime?”, “Does my job have to pay me for …”, “My paycheck is not right…” or “What do I do if…”, the your best option is to contact an Ohio overtime attorney to obtain advice with respect to FLSA questions or any particular employment law issue. Use and access to this employment law website or any of the links contained within the site do not create an attorney-client relationship. The legal opinions expressed at the top of this page or through this site are the opinions of the individual lawyer and may not reflect the opinions of Spitz, The Employee’s Law Firm, Brian Spitz, or any individual attorney.