(a) Employment arrangements which provide for a commission on goods
or services to be paid to an employee of a
retail or service establishment may also provide, as indicated in
Sec. 779.413, for the payment to the employee at a regular pay period of
a fixed sum of money, which may bear a more or less fixed relationship
to the commission earnings which could be expected, on the basis of
experience, for an average period of the same length. Such periodic
payments, which are variously described in retail or service
establishments as ``advances,'' ``draws,'' or ``guarantees,'' are keyed
to a time base and are usually paid at weekly or other fixed intervals
which may in some instances be different from and more frequent than,
the intervals for payment of any earnings computed exclusively on a
commission basis. They are normally smaller in amount than the
commission earnings expected for such a period and if they prove to be
greater, a deduction of the excess amount from commission earnings for a
subsequent period, if otherwise lawful, may or may not be customary
under the employment arrangement. A determination of whether or to what
extent such periodic payments can be considered to represent commissions
may be required in those situations where the employment arrangement is
that the employee will be paid the stipulated sum, or the commission
earnings allocable to the same period, whichever is the greater amount.
The stipulated sum can never represent commissions, of course, if it is
actually paid as a salary. If, however, it appears from all the facts
and circumstances of the employment that the stipulated sum is not so
paid and that it actually functions as an integral part of a true
commission basis of payment, then such compensation may qualify as
compensation which ``represents commissions on goods or services''
within the meaning of clause (2) of the section 7(i) exemption.
(b) The express statutory language of section 7(i), as amended in
1966, provides that ``In determining the proportion of compensation
representing commissions, all earnings resulting from the application of
a bona fide commission rate shall be deemed commissions on goods or
services without regard to whether the computed commissions exceed the
draw or guarantee'' which may be paid to the employee. Thus an employee
who is paid a guarantee or draw against commissions computed in
accordance with a bona fide commission payment plan or formula under
which the computed commissions vary in accordance with the employee's
performance on the job will qualify for exemption provided the
conditions of 7(i)(1) are met as explained in Sec. 779.419. Under a bona
fide commission plan all of the computed commissions will be counted as
compensation representing commissions even though the amount of
commissions may not equal or exceed the guarantee or draw in some
workweeks. The exemption will also apply in the case of an employee who
is paid a fixed salary plus an additional amount of earned commissions
if the amount of commission payments exceeds the total amount of salary
payments for the representative period.
(c) A commission rate is not bona fide if the formula for computing
the commissions is such that the employee, in fact, always or almost
always earns the same fixed amount of compensation for each workweek (as
would be the case where the computed commissions seldom or never equal
or exceed the amount of the draw or guarantee). Another example of a
commission plan which would not be considered as bona fide is one in
which the employee receives a regular payment consituting nearly his
entire earnings which is expressed in terms of a percentage of the sales
which the establishment or department can always be expected to make
with only a slight addition to his wages based upon a greatly reduced
percentage applied to the sales above the expected quota.
