According to an announcement from the Department of Labor, two California insurance firms recently found themselves in hot water because of how they were paying employees.
Apparently, these folks didn’t realize that paying employees on a commission-only basis does not get you off the hook for minimum wage, overtime and record-keeping rules. This was an expensive lesson: the fines and back wages totaled almost $120,000 for one company and about $200,000 at the other.
So what were they doing wrong?
Because they only paid commissions, they apparently didn’t bother keeping time records for anybody. Which meant they weren’t keeping track of how many hours people were working or how their pay translated into hourly wages — which in turn meant some people made less than minimum wage some weeks, and some weren’t paid overtime when they worked over 40 hours in a week.
As a result, in addition to the fines, back wages and penalties, the companies were also ordered to implement timekeeping systems to keep track of workers’ hours. (We’ve got some good suggestions for them if they’re still looking for the perfect system! 😉 )
Back in 2011, some Ashley Furniture HomeStores in Texas found themselves in a similar situation, so apparently it’s not as uncommon as I initially thought. They had to come up with an additional $57,000 in back wages. In the case of the Ashley Furniture stores, a company spokesperson said they were unaware of the federal wage regulations related to commission-only employees, and didn’t realize that if these folks work more than 40 hours in a week, the company must make sure they receive at least 1.5 times the federal minimum wage for their overtime. If their commission pay is not sufficient to meet that threshold, the company is required to make up the difference.
Word to the wise: if any of you pay your employees on commission, be sure you keep track of how much time they’re actually working, and how those commission payments translate into hourly wages.
Do you pay any of your employees on pure commission? If so, what steps do you take to make sure they’re getting at least minimum wage?