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May 13, 2010
Beware When Calculating OT for Non-Exempt Salespeople Receiving Deferred Commission

In a BLR webinar titled "Reducing Overtime Costs: What You Legally Can—and Can't—Do to Keep Workers at Their Straight-Time Rates," Laura P. Worsinger, Esq., cautioned employers about a special challenge to consider when calculating overtime for non-exempt salespeople who receive deferred commission.

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First, she explained that overtime is paid based on the regular rate of pay. When determining that rate, the Fair Labor Standards Act (FLSA) requires that employers include all compensation paid to an employee. Such compensation includes:

  • Commissions
  • Bonuses
  • Other forms of compensation

Second, she said that it is important to note that non-exempt employees who earn commission on a deferred basis pose a special challenge with respect to payment of overtime compensation:

Regular and overtime compensation must be paid in the same pay period in which the work is performed. But employers are not required to pay commissions until they can be reasonably calculated.

As a result, employers should keep in mind that:

  • It is permissible to advance to the employee a draw against commissions, so long as the draw is guaranteed in an amount equivalent to at least minimum wage.
  • Overtime compensation must be recalculated when deferred commissions are determined.

Laura P. Worsinger, Esq. is Of Counsel with the Los Angeles office of Dykema Gossett PLLC. She has broad counseling and litigation experience and specializes in the defense of employers in individual and class actions involving wage and hour violations, misclassification, discrimination, wrongful termination, and other employment-related proceedings. She can be contacted at

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