(a) If more than half of the compensation of an employee of a retail
or service establishment for a representative period as previously
explained represents commissions on goods or services, one additional
condition must be met in order for the employee to be exempt under
section 7(i) from the overtime pay requirement of section 7(a) of the
Act in a workweek when his hours of work exceed the maximum number
specified in section (a). This additional condition is that his
``regular rate'' of pay for such workweek must be more than one and one-
half times the minimum hourly rate applicable to him from the minimum
wage provisions of section 6 of the Act. If it is not more than one and
one-half times such minimum rate, there is no overtime pay exemption for
the employee in that particular workweek.
(b) The meaning of the ``regular rate'' of pay under the Act is well
established. As explained by the Supreme Court of the United States, it
is ``the hourly rate actually paid the employee for the normal,
nonovertime workweek for which he is employed'' and ``by its very nature
must reflect all payments which the parties have agreed shall be
received regularly during the workweek, exclusive of overtime
payments.'' (Walling v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419.)
It is a rate per hour, computed for the particular workweek by a
mathematical computation in which hours worked are divided into
straight-time earnings for such hours to obtain the statutory regular
rate (Overnight Motor Co. v. Missel, 316 U.S. 572). By definition (Act,
section 7(e), the ``regular rate'' as used in section 7 of the Act
includes ``all remuneration paid to, or on behalf of, the employee''
except payments expressly excluded by the seven numbered clauses of
section 7(e). The computation of the regular rate for purposes of the
Act is explained in part 778 of this chapter. The ``regular rate'' is
not synonymous with the ``basic rate'' which
may be established by agreement or understanding of the parties to the
employment agreement under the provisions of section 7(g)(3) of the Act;
that section, like section 7(i), merely provides an exemption from the
general requirement of overtime compensation based on the regular rate
contained in section 7(a), if certain prescribed conditions are met (in
section 7(g)(3) these include payment of overtime compensation on a
basic rate established and authorized in accordance with its terms). The
requirement of section 7(i) with respect to the ``regular rate'' of pay
of an employee who may come within the exemption which it provides is a
simple one: ``the regular rate of pay of such employee,'' when employed
``for a workweek in excess of the applicable workweek specified'' in
section 7(a), must be ``in excess of one and one-half times the minimum
hourly rate applicable to him under section 6.'' The employee's
``regular rate'' of pay must be computed, in accordance with the
principles discussed above, on the basis of his hours of work in that
particular workweek and the employee's compensation attributable to such
hours. The hourly rate thus obtained must be compared with the
applicable minimum rate of pay of the particular employee under the
provisions of section 6 of the Act. If the latter rate is $1.60 an hour,
for example, then the employee's regular rate must be more than $2.40 an
hour if the exemption is to apply.
