The Fair Labor Standards Act (FLSA) is a federal law that protects workers nationwide from abusive payroll practices. The FLSA establishes, among other things, minimum wage requirements and overtime pay rights. The FLSA requires that workers who are paid on an hourly basis, as well as those paid a substandard salary, to receive overtime wages that amount to one-and-a-half (1.5 times) their average hourly wage.
However, the law does provide certain exemptions. One of those exemptions relates to workers who earn a commission by closing sales at a retail establishment. Those working at furniture stores or car dealerships, for example, may find that these exceptions apply to them. The law specifically refers to inside salespeople at a fixed location as opposed to traveling sales professionals. Inside sales professionals are sometimes exempt from overtime pay requirements, but not always.
How are the rules different for inside sales professionals?
Generally, inside sales professionals are not entitled to receive overtime compensation. However, to qualify under the inside sales exemption, a company must pay at least 150% of the current federal minimum wage as the worker’s hourly compensation. Additionally, the worker should be eligible to receive commissions, and those commissions typically make up at least half of the employee’s earnings.
Workers who make only a few, small commissions each week may be eligible for overtime pay, as are those who do traveling sales work and those paid a lower hourly wage. Those paid lower wages to supplement their commissions are also likely eligible for overtime pay. Given that the rules look at the breakdown of total pay, it is possible for a workers’ status to change from exempt to non-exempt. A scenario in which a worker may not have been eligible for overtime could shift to make them eligible if sales start to decrease and commissions become less frequent.
All too often, businesses try to take advantage of the ignorance of employees when it comes to the FLSA rules about overtime and other workplace protections. Understanding how overtime rules are different for inside salespeople who earn a commission may help those workers understand when they should consider filing a wage claim against their employers.