Question 1

Can I pay an employee purely on commission?

Accepted Answer

Yes, but only if they qualify for specific exemptions, such as the "outside sales" exemption. Outside salespersons do not have a salary requirement and are exempt from minimum wage and overtime laws. However, most other employees must receive at least the minimum wage. (Reference: 01:25)

Question 2

Does an inside salesperson qualify for the outside sales exemption?&nbsp;

Accepted Answer

No. If a salesperson works primarily from an office using a telephone or computer, they do not qualify as an outside salesperson. This is true even if their job duties are otherwise identical to those of a field representative. (Reference: 02:42)

Question 3

What are the requirements for the outside sales exemption?&nbsp;

Accepted Answer

The employee's primary duty must be making sales away from the employer&rsquo;s place of business. While there is no strict percentage test, they must regularly visit customers in person. Time spent in the office for follow-up work related to those outside visits generally counts toward the exemption. (Reference: 03:29)

Question 4

Can inside sales employees be exempt under the administrative exemption?

Accepted Answer

Generally, no. Courts typically rule that sales work falls under "production" (producing the results of the business) rather than "administration" (running the business). Therefore, inside salespeople are usually entitled to overtime pay. (Reference: 06:24)

Question 5

What is the Section 7(i) overtime exemption?&nbsp;

Accepted Answer

This is a specific exemption for employees of retail or service establishments. To qualify, the employee&rsquo;s regular rate of pay must exceed 1.5 times the minimum wage, and more than half of their total compensation must come from commissions. (Reference: 08:46)

Question 6

What is the difference between a commission and a piece rate?&nbsp;

Accepted Answer

A commission is usually a percentage of a sale's value or profit. A piece rate is a set payment for a unit of production, such as a flat fee per square foot of material installed. Unlike some commissioned roles, piece-rate workers are never exempt from overtime. (Reference: 12:10)

Question 7

How do I calculate overtime for a commissioned employee?&nbsp;

Accepted Answer

You must find the "regular rate" by dividing the total weekly commission by the total hours worked. You then owe the employee an additional half of that regular rate for every hour worked over 40. (Reference: 15:02)

Question 8

Do stockbrokers and financial advisors get overtime?&nbsp;

Accepted Answer

They can be entitled to overtime if they work primarily in an office and are not paid a guaranteed salary of at least $685 per week. High total earnings do not automatically make an employee exempt from overtime. (Reference: 18:56)

Question 9

Can I deduct a loan repayment from an employee&rsquo;s commission?&nbsp;

Accepted Answer

Yes, provided there is a written, voluntary agreement. However, you must be careful not to deduct from the guaranteed salary portion of an exempt employee&rsquo;s pay, as "busting" the salary can trigger a loss of the overtime exemption. (Reference: 33:10)

Question 10

Can an employer change a commission plan retroactively?&nbsp;

Accepted Answer

No. A commission plan is a contract. You can change the terms for future sales by providing written notice, but you cannot legally reduce the commission rate for sales that have already been completed. (Reference: 37:30)

Question 11

Can I withhold commissions if an employee leaves the company?

Accepted Answer

In many states, earned commissions cannot be forfeited upon termination. However, you can define in your contract that a commission is not "earned" until the company actually receives payment from the customer. (Reference: 39:15)

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