Overtime Pay in the Retail Industry

Barkan Meizlish , May 19, 2015

Under the Fair Labor Standards Act (FLSA), all non-exempt employees must receive minimum wage and overtime pay at a rate of one-and-a-half times the regular rate of pay.  In the retail industry, certain employees paid by commission may be exempt from this requirement under Section 7(i) of the FLSA (29 U.S.C. § 207(i)).  If a commissioned sales employee does not meet the exemption’s three conditions, the employee is entitled to overtime pay on top of commissions.  Here are the basics of this exemption:

1. The employee must be employed by a retail or service establishment, in which 75% of its annual dollar volume of sales of goods and services is not for resale, and is recognized as retail sales or services in the particular industry.

2. The employee’s regular rate of pay must at least be one and one-half times the minimum wage.  This can be determined by dividing the employee’s total earnings in a representative period (a period of time no less than one month and no greater than one year) by the hours worked during that period.  This step is met if the result is greater than one and one-half times the minimum wage.

3. Finally, over half of the employee’s earnings must be from commission on goods or services.

Source:  DOL Fact Sheet #20: Employees Paid Commissions By Retail Establishments Who Are Exempt Under Section 7(i) From Overtime Under The FLSA, http://www.dol.gov/whd/regs/compliance/whdfs20.pdf

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