California HR

Recordkeeping: Do We Have to Track Hours of Commissioned Employees?

We have a number of people who work on a straight commission basis. Do we have to track their hours? Do we owe overtime? — Kayla, HR Specialist in Citrus Heights


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Outside sales people are exempt from minimum wage and overtime, so you don’t have to track their hours for those purposes. However, you might still want to track their time; for example, for Family and Medical Leave Act (FMLA) purposes.

If your employees are commissioned inside sales people, they are sometimes exempt from overtime if they meet the requirements for exemption, but because they are still owed minimum wage, you have to track their hours. The federal rules only exempt from overtime inside sales people who meet the following criteria:

  • the employee must work in a retail or service establishment;
  • more than half of the employee’s compensation must come from commissions on sales of goods or services; and
  • the employee must regularly be paid more than 11/2 times the applicable minimum wage.

Some people on commission with high earnings do qualify for overtime, such as stockbrokers. Because “financial institution” is one of the various entities that the federal regulations define as not in retail, some stockbrokers with six-figure salaries are qualifying for overtime.

Under California law, the commissioned exemption is not restricted to retail establishments only. The exemption applies to all commissioned salespeople who earn total compensation of at least 11/2 times the minimum wage for each hour worked and who receive at least 50 percent of that amount from commissions. So a commissioned employee not in retail would be owed overtime for hours worked over 40 in a week under federal law, but not for hours worked over 8 in a day as would otherwise be the case under California law.

Again, the hours have to be tracked so that you can show that the employees are making 11/2 times the minimum wage.

Lloyd W. Aubry, Jr., Esq., former California labor commissioner, is of counsel at the San Francisco office of law firm Morrison & Foerster.