Commissioned salesperson selling a vehicle to a customer.

In Focus: Wage Protections for Commissioned Workers

By Douglas Lipsky

A common misconception is that commissioned employees are not entitled to the same protections as hourly and salaried workers, including minimum wage and overtime. Certain commissioned workers In New York are protected by federal and state laws, however. If you work on a commission basis, the best way to assert your rights is to consult an experienced employment lawyer.

Are commissioned employees exempt from wage and hour laws?

Generally, workers who are paid on a commission basis are exempt from the Fair Labor Standards Act (FLSA) if the following criteria are met:

  • The employee works in a retail or service establishment
  • More than half of the employee’s earnings consist of commissions
  • The employee’s base pay exceeds one and one-half times the minimum wage rate for each hour worked over 40 per week

A retail or service establishment is one in which at least 75 percent of its annual sales are derived from original sales, not the resale of a product or service. Furthermore, the industry in which the employer is conducting business must recognize the sales as retail. 

In addition, employees in outside sales positions (e.g. door-to-door salespeople, pharmaceutical sales) are exempt from minimum wage and overtime regulations. The exemption only applies to employees who regularly work away from the company’s place of business and whose duties primarily involve sales.

If the foregoing conditions are not met, however, then commissioned workers enjoy the same wage and hour protections under state and federal law as hourly or salaried employees. This means commissioned employees may be entitled to minimum wage and overtime pay. If a salesperson’s draw and commission does not equal the wage minimum for hours he or she worked in a single workweek, for example, the employer must make up the difference. Similarly, nonexempt commissioned employees are also entitled to overtime pay of one and one-half times their hourly rate for all hours worked in excess of 40 per week.

Additional Protections for Commissioned Workers in New York

Under the New York Labor Law, commissioned employees are entitled to a written agreement that details how and when commissions will be paid. In addition, if a commissioned employee receives a draw against future commissions and fails to make enough sales to meet the expected commission, the employee is not required to pay back the difference. Finally, a commissioned employee who is fired or quits is entitled to any commission earned while he or she was employed. 

Why This Matters

Although commissioned-based wages are designed to incentivize employees to work harder and make more sales, commissioned employees are entitled to wage and hour protections. If your employer has failed to pay commissions that you have earned or denied you minimum wage or overtime pay, a skilled employment lawyer can help you recover just compensation.

About the Author
Douglas Lipsky is a co-founding partner of Lipsky Lowe LLP. He has extensive experience in all areas of employment law, including discrimination, sexual harassment, hostile work environment, retaliation, wrongful discharge, breach of contract, unpaid overtime, and unpaid tips. He also represents clients in complex wage and hour claims, including collective actions under the federal Fair Labor Standards Act and class actions under the laws of many different states. If you have questions about this article, contact Douglas today.