How Do Commissions and Salaries Affect Overtime Pay?
EDITORS NOTE: This is the second of two blog posts concerning the rights some salaried workers have to receiving overtime compensation. Part one explained the common misconception associated with those who are entitled to overtime pay. Part two describe how employees will be compensated.
Written by attorney Allen Vaught
You work hard for your money. But are you earning everything you’re entitled to?
Some employers often violate federal labor laws that require them to pay overtime to salaried workers.
Although some employees are exempt from overtime pay, there are many who don’t know that they are unlawfully being taken advantage of and their employer is in violation of the federal Fair Labor Standards Act (FLSA).
Unless a worker is “exempt” from the FLSA overtime wage laws, they must be paid overtime. Almost every employee who is paid an hourly rate must be paid overtime when they work more than 40 hours in a workweek.
If you were due overtime, but not paid overtime by your current or former employer, the FLSA allows you to recover double the amount you were owed. If your employer owes you $5,000 in unpaid overtime, that amount becomes $10,000 once the late payment penalty known as liquidated damages is included.
And employees can receive up to two years of back pay, sometimes even three in some circumstances. So, if you learned on January 1, 2012 that your employer did not pay you required overtime pay, you could potentially recover back wages from as far back as January 1, 2009.
So, for example, if you are a nurse working an average of 60 hours per week and who is paid $20 per hour straight time for those 60 hours, you are due up to $200 per week/$10,400 per year in back overtime pay for the remaining “half time” you were not paid for each hour over 40. (Employee is due time and half, and since straight time has been paid for all 60 hours, what remains due is the half time for the hours over 40). Also, once the FLSA’s liquidated damages provision is included, that same nurse’s amount due becomes $400 per week/$20,800 per year. Assuming the FLSA’s three-year recovery period applies, that nurse would be due $62,400.
Similarly, an employee paid a straight commission generally must always be paid overtime. For example, if you are a salesperson being paid a straight commission which averages $800 per week, and you work 48 hours per week on average, then you could be due as much as $240 per week/$12,480 in back pay and an additional $240 per week/$12,480 in liquidated damages in addition to your commission pay. Assuming a three-year recovery period, that sales employee might be entitled to as much as $74,800.
If your pay includes both a salary and a performance-based commission, which is typical in many sales positions, the employer must retroactively include your commissions in your overtime rate of pay. For example, if you make sales calls by phone, and are paid a salary of $25,000 per year, earn an average annual commission of $15,000 per year, work an average of 50 hours per week, but only get overtime based on your $25,000 base salary, then you are due as much as an additional $216 per week/$11,250 per year in unpaid overtime and liquidated damages. Commissions must be included in determining your overtime rate of pay.
Many times, salaried employees don’t even know that they are due compensation for lost overtime wages. The FLSA makes it illegal for companies to retaliate against an employee for making an inquiry into their wages due, or for bringing a claim to recover those wages. If you feel you have been a victim it’s important to call an attorney soon to receive all the money you may deserve. The FLSA allows a limited about of time to seek back overtime wages.