Instead of getting paid by the hour, some employees get paid on "commission". This practice is often done in sales positions but may be used in other types of work as well. Employees earning commission may also earn a salary or hourly wage and get paid a commission in addition to that. The Federal Labor Standards Act and the Wage & Hour Division of the Department of Labor govern the law with respect to commissions.
A sales commission is a sum of money paid to an employee upon completion of a task, usually selling a certain amount of goods or services. Employers sometimes use sales commissions as incentives to increase worker productivity. A commission may be paid in addition to a salary or instead of a salary.
2. I had a slow week, and didn't make any commission. Does that mean I work for free?
No. As long as you covered by the Fair Labor Standards Act (FLSA) or an equivalent state law, you must earn at least the hourly minimum wage, which nationally is $7.25. An employer cannot create a commission standard that is so low that it makes it impossible for you to be paid the minimum wage when your weekly pay is averaged by the number of hours worked.
If your pay including commission is below the minimum wage, then your employer is required to make up the difference. For example, if during a slow period, your commission averages only $2.50 per hour you work, your employer must pay you an additional $4.75 per hour to make up the difference, so that you receive the $7.25 minimum wage.
3. I had an agreement with my employer to pay me commission. Now I am not getting paid. What do I do?
The Fair Labor Standards Act (FLSA) does not require the payment of commissions, so employees cannot enforce their right to receive a commission by going to the federal agency that enforces the FLSA or going to court under the FLSA. However, that does not mean you are completely out of luck if you did not receive the commission that you were promised, as you may have a contractual right to receive the commissions that you earned.
First, you must be certain that you had a clear agreement with your employer about the commission pay—including the rate of the commission. If you did, you should draft a letter to your employer notifying them that you are not receiving your promised commissions. If that does not resolve the case, you can seek the commissions you are owed in small claims court, as long as the amount is relatively low. Small claims court generally does not require an attorney and the filing fees are low. If the amount is large and your state small claims court will permit, you should seek an attorney. Some states have laws that award attorney's fees to employees in pursuit of unpaid commissions.
4. My employer is not including my commissions in my final paycheck. Is this allowed?
The answer is that it depends. There are many states that don't say anything about whether an employer has to include commissions with the final paycheck. Among the states that do, the laws say that the paycheck must include all "earned wages." However, some employers consider a commission earned when the sale is made, while others consider it earned when the money from the buyer arrives. If your employment agreement states the latter, then you may have to wait in order to receive your commission.
Employers and employees typically enter into a written contract that outlines details of how commissions will be earned and paid. If the agreement does not say you can withhold the employee’s commissions, the employer must pay according to the terms of the contract. Whether commission agreements are enforceable comes down to state law.
If you still have questions about your state's laws relating to commissions in your final paycheck, then you may wish to contact the agency in your state which handles wage and hour/labor standards violations, listed on our site's state government agencies page, or an attorney familiar with this area of the law.
5. I earn commission and I worked 50 hours last week, but my employer does not pay me overtime. Does my employer have to?
That depends on several factors, the first being whether you're an inside or outside salesperson. If you spend more than half of your work time making sales outside of a central office, then you are an outside salesperson and do not qualify for overtime.
If you are an inside salesperson you still may not qualify for overtime if:
For purposes of calculating this exemption, tips are never considered commissions.
6. Who enforces the law?
The FLSA is enforced by the Wage & Hour Division (WHD) of the U.S. Department of Labor. Wage-Hour's enforcement of FLSA is carried out by investigators stationed across the U.S., who conduct investigations and gather data on wages, hours, and other employment conditions or practices, in order to determine whether an employer has complied with the law. Where violations are found, they also may recommend changes in employment practices to bring an employer into compliance.
It is a violation to fire or in any other manner discriminate against an employee for filing a complaint or for participating in a legal proceeding under FLSA.
Willful violations may be prosecuted criminally, and the violator fined up to $10,000. A second conviction may result in imprisonment. Employers who willfully or repeatedly violate the minimum wage requirements are subject to a civil money penalty of up to $1,000 for each such violation.
The FLSA makes it illegal to ship goods in interstate commerce which were produced in violation of the minimum wage, overtime pay, child labor, or special minimum wage provisions.
To contact the Wage & Hour Division for further information and/or to report a potential FLSA minimum wage violation, call:
Toll Free: (866) 4USWAGE (866-487-9243) TTY: (877) 889-5627 (available Monday-Friday 8 a.m. to 5 p.m. Eastern Time)
You may also contact your local WHD office.
If you need further information about your state's wage and hour laws and/or wish to report a potential state law violation, then you may wish to contact the agency in your state which handles wage and hour/labor standards violations, listed on our site's state government agencies page.
7. What remedies are available to me?
There are several different methods under the FLSA for an employee to recover unpaid minimum and/or overtime wages; each method has different remedies.
Wage & Hour may supervise payment of back wages.
The Secretary of Labor may bring suit for back wages and an additional penalty, called "liquidated damages," which can be equal to the back-pay award (essentially doubling the damages) if an employer willfully violated the statute.
An employee may file a private lawsuit for back pay and an equal amount as liquidated damages, plus attorney's fees and court costs. An employee may not bring a lawsuit if he or she has been paid back wages under the supervision of WHD or if the Secretary of Labor has already filed suit to recover the wages.
The Secretary of Labor may obtain an injunction to restrain any person from violating FLSA, including the unlawful withholding of proper minimum wage and overtime pay.
Your state law may have different methods for recovery of unpaid wages, and different remedies to be awarded to those who succeed in proving a violation. For further information, please contact the agency in your state which handles wage and hour/labor standards violations, listed on our site's state government agencies page.
8. How do I file a complaint? How long do I have to file?
To file a complaint for unpaid wages under the FLSA, you may either go to the WHD, which may pursue a complaint on your behalf, or file your own lawsuit in court (which may require you to hire an attorney).
Do not delay in contacting the WHD or your state agency to file a claim. There are strict time limits in which charges of unpaid wages must be filed. To preserve your claim under federal law, you must file a lawsuit in court within two years of the violation for which you are claiming back wages, except in the case of an employer's willful violation, in which case a three-year statute applies. However, as you might have other legal claims with shorter deadlines, do not wait to file your claim until your time limit is close to expiring. It may be helpful to consult with an attorney prior to filing your claim, but it is not necessary to have an attorney to file your claim with the state and federal administrative agencies.
Your state wage law may have different deadlines for recovery of unpaid wages. For further information, select your state from the map below or from this list.
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