Paid Based on Commissions: Are You Paid Overtime?
Are you paid based on commissions? Yes. Do you travel regularly for work? No. Are you paid overtime? No. Then, your employer probably should be paying you overtime.
The Fair Labor Standards Act provides an exemption from overtime for “outside” sale professionals who are paid based on commissions. However, in order to qualify for this exemption, you must travel regularly away from your home or business office for sales. If most of your sales occur through the internet or over the phone and you do not travel regularly, then your employer must pay you overtime unless you qualify for another exemption, such as the executive or administrative exemption.
To be an exempt executive, all of the following tests must be met:
- Be compensated on a salary or fee basis at a rate not less than $455 per week;
- Have as the primary job duty managing the enterprise or a customarily recognized department or subdivision;
- Customarily and regularly direct the work of at least two or more full-time employees or their equivalent; and
- Must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.
To be an exempt administrative employee, all of the following tests must be met:
- Be compensated on a salary or fee basis at a rate not less than $455 per week;
- Have as the primary job duty performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
- The employee’s primary duty includes the exercise of discretion and independent judgment as to matters of significance.