Worker’s Who Receive Commissons Not Always Exempt Under The FLSA

In a recent decision, Alvarado v. Corporate Cleaning Service, Inc., a federal judge for the Northern District of Illinois determined that window washers may proceed against their employer with a claim for overtime benefits under the Fair Labor Standards Act (FLSA).

The FLSA provides that all employees who are not exempt from the FLSA must be paid overtime benefits at a rate of one and one half times their regular rate of pay for all hours worked in excess of 40 hours in a work week.

In Alvarado, the window washers often worked between 60 and 70 hours per week, but never received overtime premiums. Despite the employees’ demands for payment, the employer asserted that the window washers were exempt from the FLSA because they were partially paid on a commission-based compensation system. Under the FLSA, employees who receive more than half their compensation in the form of “commissions on goods or services” are generally not entitled to overtime payment.

Determining whether a “commission-based” compensation scheme exists is not always clear-cut. Case law has found a commission-based system exists where compensation is linked to the price charged to the consumer for the good or service being sold and where compensation is “related to the value of the service performed.”

Although some evidence indicated that the window washers were paid a commission – i.e. the window-washers were paid on a point system rather than an hourly wage – additional evidence showed that the employer was inconsistent in charging customers in this manner. As a result, the federal judge denied the employer’s motion for summary judgment and allow

Overtime premiums can be a significant source of extra income. In order to avoid paying these premiums, some employers may try to mischaracterize how you are paid, your job classification or your rate of pay. For more information or if you believe your employer has denied you overtime compensation you deserve, please contact Buckley Bala Wilson Mew LLP, a Georgia law firm dedicated to protecting employee’s rights.