The Fair Labor Standards Act, enforced by the Wage and Hour Division of the U.S. Department of Labor, mandates that employers must pay hourly overtime rates to employees for each hour after the standard 40 hours in a workweek. Some types of employees, however, are exempt from this requirement, including salespeople who work for commissions. However, commission salespeople are exempt only if they meet certain criteria and their pay consistently meets or exceeds minimum wage and overtime requirements.
Minimum Wage and Overtime
The federal minimum wage is $7.25 per hour as of July 2010. Employers are required to pay 1 1/2 times this rate--commonly called "time-and-a-half"--for each hour over 40 that an employee works. This law applies to salaried as well as hourly employees. Salaries must be based on the number of hours the employer expects the employee to work, and if the salaried employee must regularly work overtime, the law requires employers to calculate overtime rates into the regular salary.
Retail salespeople who earn commissions as well as a payroll wage may be exempt from overtime regulations if their commissions regularly exceed half the payroll wage. Also, the sum of the employee's combined commission and payroll wage earnings must consistently equal more than time-and-a-half at the minimum wage rate.
Outside Sales Exemption
Outsides salespeople whose work "customarily and regularly" requires them to work away from the employer's business location are also exempt from overtime. While such salespeople usually work on commission, the law applies regardless of the compensation method or amount, as the employee's travels make precise calculations of hours virtually impossible.