Although it involves Texas law, a recent case illustrates the pitfalls an employer can face when former employees make claims for commissions or compensation after their employment has ended. It also offers suggestions on how employers with commissioned salespeople can avoid the same traps.
Most employers are well aware of their obligations under the Fair Labor Standards Act (FLSA)—primarily, the requirement to pay at least minimum wage and pay overtime for hours worked in excess of 40 in a given workweek. These apply to a large percentage of employees, unless they fall under one of the various exemptions.
Employers’ failure to properly factor bonus payments into overtime is probably the most common wage and hour compliance error I see, including among employers that have experienced HR personnel who are knowledgeable about the requirements of the Fair Labor Standards Act (FLSA). Failure to factor these payments into overtime is also really difficult to defend because the law on this point (unlike for some FLSA issues) is pretty clear.
In a recent decision, the U.S. Court of Appeals for the 6th Circuit—which covers Kentucky, Michigan, Ohio, and Tennessee—held that an employer’s week-to-week, commission-only pay system was generally valid. However, it was illegal for the company’s policy to state that employees had to repay immediately upon termination draws that had been given during employment.
Late last year, the Massachusetts Appeals Court ruled that commissions are “due and payable” under the Massachusetts Wage Act at the time an employee resigns or is terminated, even if the employee might not be eligible to receive the payments under the terms of the company’s commission agreement or plan. (See, Commission Structure Doesn’t Justify […]
In this article series, we provide a refresher on the basics of the Fair Labor Standard Act’s (FLSA’s) requirements. In our previous article, we discussed the FLSA’s minimum wage requirements applied to tipped employees and piece-rate workers. Here we discuss how they impact employees paid on a commission basis and payroll deductions.
The Fair Labor Standards Act (FLSA) is a federal law that imposes minimum wage, overtime, record-keeping, and child labor requirements. Although the U.S. Department of Labor (DOL) enforces the FLSA, employees may file their own lawsuits under the Act. A lawsuit may be an individual action or a collective action, which is similar to a […]
Question: If there is an agreement in place that an employee must meet certain criteria before receiving their commission payout, and they don’t meet the criteria by the deadline, can you forfeit paying the commission? For example, the invoice/job order the employee submits has to be turned in by X amount of days otherwise the […]
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 […]
Commission payments often make up a significant portion of the compensation paid to employees who work in sales. The structure of commission payments varies from industry to industry and from region to region, but commissions serve the same basic purpose: financially motivating employees to increase their sales with the promise of receiving higher income.