Under the Fair Labor Standards Act, retail or service establishment employees can be exempt from overtime pay requirements if they are paid more than one and a half times the minimum wage and more than half of their compensation is comprised of commissions on goods or services (“commissioned employee”
Articles Discussing Commissions Under the FLSA.
In what may be viewed as a pyrrhic victory, now-defunct “big box” electronics, appliance and furniture retailer hhgregg’s commission-with-draws compensation program generally was lawful under the FLSA, the Sixth Circuit Court of Appeals has held. However, its policy holding employees liable for any unearned draw payments upon termination of employment would violate the Act. Stein v. hhgregg, Inc., 2017 U.S. App. LEXIS 19908 (3rd Cir. Oct. 12, 2017). The Sixth Circuit has jurisdiction over Kentucky, Michigan, Ohio and Tennessee.
This blog has stressed (most recently here and here) the importance of carefully drafting incentive compensations plans to avoid unintentionally converting incentive compensation into earned “wages” protected under state law. Another recent decision, this one from the Court of Appeals for the Seventh Circuit reinforces the employer benefits of careful drafting. Lawson v. Sun Microsystems, Inc., 2015 U.S. App. LEXIS 11201 (7th Cir. June 30, 2015).
Reading about a recent lawsuit filed against Groupon, I was reminded that even the most cutting edge businesses may not understand the nuances associated with calculating overtime and find themselves a target for running afoul of wage and hour laws. My colleague and fellow blogger, Bill Pokorny, wrote a helpful blog entry last week on calculating overtime for salaried employees. I thought it might be useful for our readers if a follow-up entry was posted discussing how to calculate overtime for salaried, non-exempt employees who also receive commissions.