Ever wonder why customer service varies from store to store or why the sales employee at your favorite retail department or clothing store is so helpful? It could be because some retail stores pay their employees based on a percentage of sales – a commission. That sales employee isn’t only helpful, his or her paycheck depends on you buying lots of merchandise.
In fact, most retail sales jobs provide for a minimum hourly rate of pay plus a commission for merchandise sold. The question I am often asked is whether this is legal. Well, that depends.
Under the federal Fair Labor Standards Act (“FLSA”), employers may lawfully average an employee’s earnings over the total hours worked in a workweek to determine if minimum wage requirements are satisfied. For example, if a commissioned employee works a total of 40 hours and is paid $400.00 in commissions in a workweek, the average hourly pay for the employee is equal to $10.00 per hour.
Since minimum wage in California is $9.00 per hour in 2015 and increasing to $10.00 per hour in 2016, the example appears to meet that the statutory minimum wage requirements.
However, if the sales employee’s workday involves anything other than selling than the employer is violating minimum wage laws.
For most retail sales or customer service jobs, the sales employee also has other responsibilities and tasks not directly tied to commissioned sales. An employee that is required to work an hour before the store opens, or after the stores closes, has to stock shelves or preform pre-open or post-closing tasks, then the employee must be compensated separately for the hours he or she is working, because such tasks are not directly tied to commissioned sales.
So, using the example above, the employee actually does sales work for 6 hours in an 8 hour day, the employee would be entitled to minimum wage for 10 hours of the workweek and then the commission is spread over the remaining 30 hours to determine if those hours meet the minimum wage requirements.
The bottom line is that retail commissioned based employees must be paid at least minimum wage for their time doing non-commissioned work. There commission pay cannot be averaged for all hours worked to meet minimum wage requirements, when some of those hours are not directly tied to commissioned sales.
If you have an employment law question, you need to talk to an attorney that is knowledgeable about worker’s rights and employment law. We can help you—Initial consultations and evaluations for employment related violations are confidential and free, so there is no cost to you to find out if you have a valid concern and are entitled to compensation.