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Sales Commissions FLSA Case

Just because sales or other commissions are a part of your paycheck doesn’t mean that you are exempted from overtime pay under the FLSA, says the federal District court in the Southern District of Ohio. Since this case also followed a Kansas District case, it looks like it could be good Georgia employment law as well.

The Ohio case, Keyes v. Car-X Auto Services, Case No. 1:2007cv00503, decided on the Plaintiff’s Motion for Summary Judgment, dealt with a “hybrid” pay plan that included commissions paid against a minimum hourly rate.

Under the FLSA, an employer gets an overtime exemption for any employee who makes more than 50% of his or her income based upon commissions. So basically each of these type of cases involves “doing the math” to determine what actual percentage of remuneration is actually commission- based.

Employees of retail or service establishments are generally compensated in any one or a combination of five ways:

(1) Straight salary or hourly rate: a stipulated sum paid weekly, biweekly, semimonthly, or monthly or a fixed amount for each hour of work.

(2) Salary plus commission: a commission on all sales in addition to a base salary.

(3) Quota bonus: paid on sales over and above a predetermined sales quota.

(4) Straight commission without advances: a flat percentage on each dollar of sales he makes.
(5) Straight commission with “advances,” “guarantees,” or “draws.”

Each of these compensation plans, except for the “straight salary or hourly rate,” qualifies as “bona fide commission plans” under federal law.

Car-X had compensated Keyes and his compatriots in this way: employees were paid the greater of either the commission rate on the total gross sale of services and products attributable to the employee during a given pay period, or, alternatively, a “default” guaranteed wage rate, which was calculated by multiplying the employee’s regular hourly rate by the number of hours actually worked in a given pay period.

In this hybrid kind of plan, there would be times an employee was paid on commission and times when he or she would not.

So, at least for the purposes of this Summary Judgment motion, this court found in this case that, “the default guaranteed wage represents a salary and only that amount in excess of such constitutes the true commission portion.”

So, after the math is done, the case will be decided. If you are in this position, please contact our offices to evaluate your situation.

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