Retail Commissions and Overtime

Just because you receive commissions doesn’t necessarily mean that you don’t qualify for overtime. The FLSA has carved out an exemption to overtime pay for people who receive commissions as a part of their salaries, but it is a very narrow exception. It is possible that people working in malls all across Georgia should be talking to an employment attorney about this issue.

The exemption, Section 7(i), applies to retail and service establishments, which 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.”

Those businesses may choose to exempt a commission employee, but only under very narrow circumstances– specifically:

1. the employee must be employed by a retail or service establishment, and
2. the employee’s regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked, and
3. more than half the employee’s total earnings in a representative period must consist of commissions.

Unless all three conditions are met, the Section 7(i) exemption is not applicable, and overtime premium pay must be paid for all hours worked over 40 in a workweek at time and one-half the regular rate of pay.

The representative period for determining if enough commissions have been paid may be as short as one month, but must not be greater than one year. The employer must select a representative period in order to determine if this condition has been met.

In applying this rule, if the employee is paid entirely by commissions, or draws and commissions, or if commissions are always greater than salary or hourly amounts paid, the-greater-than-50%-commissions condition will have been met.

If the employee is not paid in this manner, the employer must separately total the employee’s commissions and other compensation paid during the representative period.

The total commissions paid must exceed the total of other compensation paid for this condition to be met.

To determine if an employer has met the “more than one and one-half times the applicable minimum wage” condition, the employer may divide the employee’s total earnings attributed to the pay period by the employee’s total hours worked during such pay period. If the result is greater than time and one-half the minimum wage, this condition of the exemption has been met.

Obviously, the main point of interest if you are employed in this way is record- keeping. You have the absolute right to see all of your pay records any time that you want, but you also need to keep track yourself.

If you have any questions about overtime pay for a commission job, feel free to contact us.