If you earn commission as part of your pay, you may be earning less than you are legally owed — and you might not even know it. Many workers who receive commissions are also entitled to overtime pay, but employers do not always get the math right. Understanding how commission pay and overtime work together is the first step to making sure you are not being shortchanged.
If you think your employer is making mistakes with your overtime or commission pay, do not wait. Contact Nichols Kaster PLLP today through our online contact form or call us at (877) 344-4628 to find out if your rights have been violated.
What Is Commission Pay?
Commission pay is money an employee earns based on the sales or work they complete. For example, a salesperson might earn a percentage of every product they sell. Some workers earn commission on top of a regular hourly wage, while others earn commission as their only form of pay. Both situations can raise questions about how overtime should be calculated.
What Is Overtime and Who Gets It?
Overtime means earning extra pay when you work more than 40 hours in a week. Under federal law — specifically the Fair Labor Standards Act (FLSA) — most workers must be paid at least 1.5 times their regular rate of pay for every hour worked over 40 in a single workweek. This is sometimes called "time and a half." Many employees believe commission-only workers or salaried workers are automatically exempt from overtime, but that is not always true.
The Regular Rate of Pay: Why It Matters
One of the most common sources of confusion — and mistakes — involves something called the "regular rate of pay." This is not simply your hourly wage. When you earn commissions, those earnings usually need to be factored into the calculation of your regular rate. Here is why this matters: if your overtime pay is calculated only on your base hourly wage and your commissions are left out, your overtime rate is too low, and you are being underpaid.
For example, imagine you earn $15 per hour and also receive $500 in commissions during a week when you worked 50 hours. Your employer cannot simply pay overtime based on $15 per hour alone. The commissions must generally be included in the calculation, which raises your regular rate and, in turn, your overtime rate.
Common Commission Pay and Overtime Mistakes Employers Make
Employers — even well-meaning ones — often make errors when it comes to paying commissioned employees. Here are some of the most frequent mistakes workers should know about:
- Leaving commissions out of the overtime calculation. As explained above, commissions usually must be included when figuring out a worker's regular rate of pay. Ignoring them leads to underpayment of overtime wages.
- Misclassifying employees as exempt. Some employers incorrectly label workers as "exempt" from overtime rules, meaning they claim those employees do not qualify for overtime at all. Being paid on commission does not automatically make someone exempt.
- Delaying commission payments to avoid overtime liability. Some employers pay commissions in a later pay period, which can affect how overtime is calculated. There are specific legal rules about how delayed commissions should be handled.
- Using the fluctuating workweek method incorrectly. This is a legal method for calculating overtime for some salaried employees, but it is often misapplied, especially when commissions are also part of the worker's pay.
- Failing to pay overtime on nondiscretionary bonuses. If your employer promises you a bonus for meeting a specific goal, that bonus is usually considered "nondiscretionary" and must be included in your regular rate of pay, just like commissions.
These mistakes can add up quickly over weeks and months, resulting in significant underpayment to workers.
Who Qualifies as Exempt from Overtime?
Not every worker is entitled to overtime. The FLSA includes exemptions — categories of workers who are not covered by overtime rules. However, these exemptions have strict requirements that must all be met. Simply calling someone a "manager" or paying them a salary does not automatically exempt them. Some of the most commonly misapplied exemptions include:
- The outside sales exemption. This applies to workers who primarily make sales away from the employer's place of business. If you mostly work in an office or from home, this exemption may not apply to you.
- The administrative exemption. This covers employees who use their own judgment on significant business matters and earn at least $684 per week (as of 2024 under federal law). Many employees are incorrectly placed in this category.
- The highly compensated employee exemption. Workers earning $107,432 or more per year may qualify for this exemption, but only if they also meet other specific requirements.
If your employer has told you that you are exempt from overtime but you are not sure why, that is worth looking into. Misclassification is one of the most widespread wage violations in the country.
Many workers find out too late that they were owed overtime for months or even years. The good news is that you may be able to recover back wages — but only if you act before the legal deadline, known as the statute of limitations. Under federal law, that window is typically two years, or three years if the violation was willful.
What Minneapolis Workers Should Know About Minnesota Law
Workers in Minneapolis have additional protections under Minnesota law. In some cases, state law provides stronger rights than federal law, which means workers may be entitled to more pay or have more time to file a claim. Minnesota also has its own wage theft law, which requires employers to follow specific rules about how and when wages — including commissions — must be paid.
Minneapolis workers are also protected by local ordinances that may affect pay practices. Staying informed about both state and local rules is important, especially in industries like retail, hospitality, and sales, where commission pay is common.
Signs Your Employer May Be Making Overtime Mistakes
Many workers do not realize they are being underpaid until someone points it out. Here are some signs that your overtime or commission pay may not be calculated correctly:
- Your overtime pay is always exactly 1.5 times your base hourly rate, even in weeks when you earned commission
- You receive a commission check in a separate pay period with no corresponding adjustment to your overtime pay
- You were told you are "salaried" or "on commission" and therefore do not get overtime, but no one has explained the legal basis for that
- Your pay stubs do not clearly show how your overtime rate was calculated
- Your total pay seems lower than expected, especially in weeks you worked longer hours and made more sales
If any of these sound familiar, it is worth getting a closer look at your pay records.
What You Can Do If You Think You Are Owed More Pay
Start by gathering your pay stubs, any written agreements about your commission structure, and records of the hours you worked. The more documentation you have, the easier it is to figure out whether there has been a mistake. You have the right to ask your employer how your overtime rate is calculated and how your commissions factor into that calculation.
If the answers you get do not add up — or if your employer is not forthcoming — speaking with an attorney who handles wage and hour cases can help clarify your options. In many cases, employees are able to recover unpaid wages, and some laws also allow for additional damages and attorney fees to be paid by the employer, meaning you may not need to pay out-of-pocket for legal help.
Talk to a Minneapolis Employment Law Attorney About Your Overtime Rights
If you earn commission and believe your overtime pay may be wrong, you do not have to figure it out alone. Nichols Kaster PLLP represents workers in Minneapolis and across the country who have been underpaid or had their rights violated by their employers. Our team takes wage and hour cases seriously and will review your situation carefully.
Reach out to Nichols Kaster PLLP through our online contact form or call (877) 344-4628 to request a consultation. Your time to file a claim is limited, so it is important to act as soon as possible.