OVERVIEW

Commissions and the Minimum Wage:

Under the Fair Labor Standards Act (FLSA), employees covered by the Act who are paid on commission must be paid at least the minimum wage, just as employees who are paid by the hour or piece.

Commissions and Overtime:

Under the FLSA, employees covered by the Act must receive overtime pay for hours worked in excess of 40 hours in a workweek at a rate of at least one and one-half times their regular rate of pay. Their "regular rate of pay" includes commissions.

FLSA, Section 7(i), exempts certain employees of retail and service establishments who are paid on a commission basis in whole or part from the FLSA's overtime pay regulations. There are two requirements for a business to be considered a "retail or service establishment":

1. Seventy-five percent (75%) of the annual dollar volume of the sales of goods or services (or of both) come from sales that are not resale; and
2. The sales of goods or services (or of both) are recognized as retail sales in the particular industry.

If a retail or service employer wants to use the Section 7(i) overtime exemption for commissioned employees, three conditions must be met:

1. The employee must be employed by a retail or service establishment; and
2. The employee's regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek; and
3. More than half the employee's total earnings in a representative period must consist of commissions on goods or services.

Unless all three conditions are met, the Section 7(i) exemption is not applicable, and overtime pay must be paid for all hours worked over 40 in a workweek at one and one-half the regular rate of pay, which includes commissions.

COMPLIANCE ASSISTANCE MATERIALS

BASIC INFORMATION

• Employment Law Guide - Minimum Wage and Overtime Pay - Describes overtime pay requirements as defined by the Fair Labor Standards Act (FLSA) and provides examples of employees exempt from them, such as certain commissioned employees of retail or service establishments.

• Handy Reference Guide to the Fair Labor Standards Act - Answers many questions about the FLSA and gives information about employees that are exempt from the Act's overtime pay requirements, such as certain commissioned employees of retail or service establishments.
• Chapter 21 - Wage and Hour Division's Field Operations Handbook (PDF) - Describes the retail and service establishment exemptions.
• Chapter 32 - Wage and Hour Division's Field Operations Handbook (PDF) - Describes overtime rules.
• Filing a complaint - DOL's Wage and Hour Division manages complaints regarding violations of the various laws and regulations it administers. To file a complaint concerning one of these laws, contact your nearest Wage and Hour Division office or call the Department's Toll-Free Wage and Hour HelpLine at 1-866-4-US-WAGE.

FACT SHEETS

• Overtime Pay Requirements of the Fair Labor Standards Act (FLSA)
• Employees Paid Commissions by Retail Establishments Who are Exempt Under Section 7(i) from Overtime Under The FLSA

E-TOOLS

• Comprehensive FLSA Presentation (Microsoft® PowerPoint®)
• elaws Fair Labor Standards Act (FLSA) Advisor - Provides information on key wage and hour topics, including explanations of which occupations are exempt from the FLSA's overtime pay requirements, such as certain commissioned employees of retail or service establishments.

RECORDKEEPING

Every covered employer must keep certain records for each non-exempt worker. The Fair Labor Standards Act (FLSA) requires no particular form for the records, but does require that the records include certain identifying information about the employee and data about the hours worked and the wages earned. For a listing of the basic records that an employer must maintain, see the FLSA recordkeeping fact sheet.

APPLICABLE LAWS AND REGULATIONS

• The Fair Labor Standards Act (FLSA) - Establishes minimum wages, overtime pay, recordkeeping, and child labor standards for private sector and government workers.
• 29 CFR Part 778 - Regulation on overtime compensation.
• 29 CFR Part 779 - Regulation on the application of the FLSA to retailers.

RELATED TOPICS AND LINKS

• State Labor Offices - When the state laws differ from the federal Fair Labor Standards Act (FLSA), an employer must comply with the standard most protective to employees.
• State Labor Laws

DOL CONTACTS*

• Employment Standards Administration (ESA)
  Wage and Hour Division
  200 Constitution Avenue, NW
  Room S-3502
  Washington, DC 20210
  Contact WHD
  Tel: 1-866-4USWAGE (1-866-487-9243)
  TTY: 1-877-889-5627
  Local Offices

• For questions on other DOL laws,
  please call DOL's Toll-Free Help Line at 1-866-4-USA-DOL. Live assistance is available in English and Spanish, Monday through Friday from 8:00 a.m. to 8:00 p.m. Eastern Time. Additional service is available in more than 140 languages through a translation service.
  Tel: 1-866-4-USA-DOL
  TTY: 1-877-889-5627

*Pursuant to the U.S. Department of Labor's Confidentiality Protocol for Compliance Assistance Inquiries, information provided by a telephone caller will be kept confidential within the bounds of the law. Compliance assistance inquiries will not trigger an inspection, audit, investigation, etc.