Question: We have some employees that are exempt and are on salary being paid a commission. If these employees work on a Sunday that is a holiday how should they be paid for that time? Are we in compliance if we calculate a flat amount based on the salary they are being paid in the biweekly pay period? Is there a special calculation we should be following to compensate them appropriately?
Answer from the experts at HR.BLR.com: Thank you for your inquiry regarding proper compensation for exempt, commissioned employees who have worked on a holiday.
First, note that the Fair Labor Standards Act (FLSA) does not require extra or premium pay for weekends, nights, holidays, or other similar times. Rather, the FLSA only requires the payment of appropriate overtime (at a rate of 1.5 times applicable minimum wage) to nonexempt workers based on the total number of hours worked. Employers who opt to pay premium or double rates for holidays, weekends, night shifts, and the like may do so as a matter of internal compensation policy, but this is not required by federal or Illinois state law (the jurisdiction you identified when submitting your question).
For exempt workers, the FSLA’s requirements will depend on the exemption claimed; however, in most cases the employer will not be required to compensate the employees differently for this holiday/Sunday work.
One of the key benefits of the Act’s white collar exemptions (administrative, executive, and professional exemptions) is the requirement that payment be made on a salary basis without regard to the number of hours (or which hours) the employee works during the given week.
This works both for and against the employee (and generally balances out to be fair). For example, if a holiday falls during the workweek and exempt employees do not work on that day, those exempt workers still receive their full salaries for that week and cannot be docked for the holiday or fluctuation of work hours. On the other hand, if exempt workers perform work on a holiday or weekend, the employer is not required to pay them additional pay for those hours—the workers simply receive the same standard salary for all hours worked that week.
If your workers are exempt under one of these white collar exemptions, then you are not required to provide additional compensation for the holiday/Sunday work. If you choose to provide additional incentive compensation, you may do so in any equitable means you’d like, as long as the workers still receive their guaranteed minimum salary for the week. (This is discussed in 29 CFR 541.604).
However, since you have mentioned that these employees are commissioned, you may be using one of the FLSA’s sales exemptions, rather than the white collar exemptions discussed above. For these exemptions—either the exemption for outside sales personnel or the retail sales exemption—the salary basis requirement does not apply. Yet, with one exception, these workers still would not be required to be compensated differently solely for working on a holiday.
The exception is as follows: In order to qualify for the retail sales exemption (Section 7(i)), the employee’s regular rate of pay must exceed 1.5 times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked.
So, if the employees’ work on Sunday would put them above 40 hours of work for that week, then we have some math to do. We must take the total earnings attributed to the pay period and divide those by the employee’s total hours worked during that pay period. If the total earnings for the period would not provide at least 1.5 times the minimum wage for all hours worked in the pay period, then the employer would be required to provide additional compensation. Essentially, the employee would not be exempt from overtime for that particular workweek and would be entitled to additional compensation of at least 1.5 times minimum wage for every hour worked over 40.
On the other hand, if the employee’s total earnings for the period would provide enough compensation to equal 1.5 times the minimum wage for every hour worked—including the hours worked on Sunday—for the pay period, then the employer is still not required to provide overtime or “premium” compensation for the holiday/Sunday work.
Similarly, if the Sunday/holiday hours would not put the employee above 40 total hours for the workweek, then no overtime hours have been worked and additional compensation is not required.
Here, again, the employer may choose to provide additional incentive compensation for working on a holiday and may do so in any equitable way, but doing so would not be required.
Because the retail sales exemption is so different from the other FLSA exemptions, if this is the exemption that applies to these workers, then you may wish to review this DOL Fact Sheet for more specifics on the exemption’s three requirements.
As the end result to this question depends on the type of exemption for which the employees qualify, you may also wish to consult with legal counsel to ensure that the commissioned workers are properly classified and that all hours worked are handled appropriately under the correct FLSA exemption.