How to Be Compliant
As an employer myself who does employ commissioned sales employees, I suggest your first move is to call your local Department of Labor and make an appointment. Take along the rules you’ve outlined for salesman overtime pay and have them review it with you to ensure you are compliant. Why is this your best bet? The new FLSA act is over 13,000 pages long and unless you can totally understand all the legal mumbo jumbo inside the FLSA act or whatever is included in your state’s wage and hour laws, you can get lost when determining overtime pay—and fast.
My state, New Mexico, does follow the FLSA act and doesn’t have its own rules that trump this act. When considering are salesmen due overtime pay, this is how it works in my state:
Salesman Joe works a five-day week from 8:00 AM to 6:00 PM and is a commission based employee. He receives commissions based on the gross sales profit from each vehicle he sells at my Ford dealership. He is not eligible for overtime pay in New Mexico because:
- He is an in-house salesperson (not placed in the outside sales category).
He is paid a draw from expected commissions on the 10th of each month.
He is paid all commission due on the 25th of each month, less the draw received on the 10th of the month.
- If salesman Joe has sold no cars the previous month and his draw received is less than minimum wage, my company must compute the hours he worked and pay him the standard minimum wage due of $7.25 per hour, but not overtime.
In New Mexico, however, outside or traveling salesmen, may be eligible for overtime based on whether they are exempt or non-exempt employees and here’s where it gets tricky, hence the need for you to visit your local Department of Labor.
Another factor in the new FLSA act of 2004 states that any employee, regardless of exempt or non-exempt status must receive overtime pay if they make less than $23,660 annually. If their commission exceeds $100,000 annually, overtime pay is waived. As revealed in a story by the Washington Post, “It’s all the other employees that fall within these wage limits that become confusing for the employer who pays commissions."
Please click on Page 2 to learn about exempt vs non-exempt sales staff, how to create a sales contract, and why ignorance of the FLSA Act is not a defense in a court of law.