I own a lawncare company and it appears i may have a problem with how i have been paying my technicians. In the past, we paid our employees on a fluctuating work week schedule but have switched to strait commission for the past 2 years to give our employees incentive to earn more money. We guarantee them minimum wage and minimum wage and a half for overtime or commissions, which ever is greater. Minimum wage may only come into play on a newer employee until they are trained and more efficient. They normally earn $400-600 per week but we always verify that minimum wage rerquirements are met. It has come to my attention that we may be required to calculate their average wage per hour and pay overtime based on their total commissions earned. Here is my problem with that. They are allowed to produce as much as they want to earn the desired amount of money per week. If they work 45 hours this week and produce and extra $1000.00, they earn another 150.00 for those 5 hours. I don't know exactly what they produce or earn in those overtime hours. It doesn't seem fair that i would have to pay them more when technically they are being paid already for their overtime by earning more commissions? When i implemented this pay plan, i contacted the state of florida and they told me as long as they were paid minimum wage and minimum wage and a half for overtime, we were ok. Also, i need to know where to find out about the manual labor exemption description in Florida to see if they fall into that catagory.
Any help would be appreciated. Thanks

Also, i need to know where to find out about the manual labor exemption description in Florida to see if they fall into that category.


Overtime is a federal law (FLSA) and it is not possible for any state to create exceptions that eliminate federal law. Federal law considers manual labor subject to overtime, and there is nothing FL can do to change that. There is a possible exception that I will cite, but it is not very likely that it is applicable.
FLSA applicable (http://www.dol.gov/esa/regs/compliance/whd/whdfs14.htm)

When i implemented this pay plan, i contacted the state of florida and they told me as long as they were paid minimum wage and minimum wage and a half for overtime, we were ok.

FL does not actually have a DOL and anything somebody told you over the phone does not have any legal force. Past that point, FL has no say over federal law.

It is possible to create a compensation agreement that does not violate the law. It is not likely that you have done so. Under federal law overtime is calculated based on all hour based wages earned during the workweek. This would include commissions. If we were to use the Way-Back machine to go back in time to when you first put in this compensation agreement and you talked to someone who knew what they were doing (not the State of FL apparently), you would have been advised to alter your commission payout amounts (prior to any work being done) down wards to offset for the legally required OT premium. I just finished answering a different question that discusses the federally required OT calculation process that I can reference.

http://laborlawtalk.com/showthread.php?t=190776

i contacted the state of florida and they told me as long as they were paid minimum wage and minimum wage and a half for overtime, we were ok.

Sure, so long as there are no commissions. Once you add those in, though, you alter the average rate of pay and the overtime owed.

i need to know where to find out about the manual labor exemption description in Florida to see if they fall into that catagory.
Any help would be appreciated. Thanks

"Manual labor exemption"? No such critter exists. Even if Florida allowed it, FLSA would not, so long as the company is required to comply (Revenue under $500,000 and no interstate commerce).

Ok, so if an employee earned wages in overtime, that income doesn't count? Am i to add overtime hours to their pay or do i calculate the hourly rate and then verify the correct amount was paid for hours worked in ot. Several large national companies use this pay plan so i assumed (probably where i went wrong) that it was ok.

The exemption i was refering to says that manual labor does not require ot until 10 hours. I understand federal takes presidence over state but doesn't seem to make much sense why that rule would exist? I was just trrying to find the legal definition of "manual labor" in FL's laws.

Thanks

The exemption i was refering to says that manual labor does not require ot until 10 hours

I had to look this up and that does not appear to be quite how it works.

http://hr.blr.com/BLR_Shared/topic/Florida_Overtime_Law.cfm

So if you have a manual laborer that works eleven hours in a day, even if they don't work more than 40 hours in the work week, you owe them extra for that eleventh hour. As I read it, extra pay, not necessarily time and a half.

Thanks Scottb, i read that earlier in my research but not sure how to interpret. I can't find anymore info that defines manual labor or explains a 40hr week. I assume the 10 hours a day at 5 days = 50 hrs or 10 hours overtime and by federal law ot would apply?

Thanks Scottb, i read that earlier in my research but not sure how to interpret. I can't find anymore info that defines manual labor or explains a 40hr week. I assume the 10 hours a day at 5 days = 50 hrs or 10 hours overtime and by federal law ot would apply?

Prior to 2002, over 130 years passed before any judicial interpretation of Section 448.01 was made. The statute actually predates the FLSA by 64 years. In the past 130 years only two reported cases have even attempting to analyze the statute. It had been held not to apply to hourly employees but is throught to be intended to apply to situations such as day laborers who are paid on a flat daily, weekly, or monthly rate. It has been argued it applies to exempt employees who perform manual labor over and a above a 10 hour exempt workday, but was ultimately found by the S.D. Court to be so vague and indefinate that is no rule at all.

In short, Florida has no laws governing overtime absent the FLSA, but does impose a higher than Federal minimum wage rate, which is currently $6.79 per hour.

Thanks Liberty911, i kind of figured that.

Can anyone answer my concern on how to calculate the overtime? If i have an employee that earned $600 in commissions in a 50 hour week, would i owe them the $180 for the time and one half of the 10 hours over 40? Or Do i verify that they made the $12 an hour for the 40 hours and 18 for the 10 hours overtime. In this case it would be $660. This seems to make more sense since they were earning commission income while they were working overtime.

Thanks Liberty911, i kind of figured that.

Can anyone answer my concern on how to calculate the overtime? If i have an employee that earned $600 in commissions in a 50 hour week, would i owe them the $180 for the time and one half of the 10 hours over 40? Or Do i verify that they made the $12 an hour for the 40 hours and 18 for the 10 hours overtime. In this case it would be $660. This seems to make more sense since they were earning commission income while they were working overtime.

What you are describing appears to fall within guidlines of the Retail Sales Exemption found in 29 CFR 779.410, et seq. However, the landscape buisness would not fall within this exception so as ScottBB pointed out, you would likely be obligated to base the hourly rate upon the total wages paid which will include the commissions.

Ok, one more question please. In order to calculate overtime for an employee, i take the total earnings, divided by the hours worked to come up with an average hourly rate. From what i am reading (no examples), it seems i would then have to take the hourly rate, multiply by 1.5 and pay them for the hours worked over 40. I guess where i am having a problem is if i already paid them for the hours worked over 40, shouldn't i just verify the amount is one and one half their hourly rate for the amount of hours worked over 40? In other words if they averaged $10 an hour in overtime, i would pay them $15 an hour for overtime or an additional $5 an hour since the calculation already accounted for the $10 an hour they were paid?

Sorry i am confused!!

Thanks for your help.

When you pay an employee on a commission basis, and no over time, it is assumed that the employer is applying the FLSAct 7(i) commission exemption. To properly apply such exemptions see this link.
http://www.dol.gov/esa/regs/compliance/whd/whdfs20.pdf

Basically the business must be a retail or service establishment, plus 50% of all earning must be from commissions, plus the employee must earn for every worked hr at least 1½ time the current minimum wage ($5.85 x1.5= $8.77 for all worked hrs.

Sample #1
$400 (commission) ÷ 50 hrs = $8 per hrs, in this case the employee received 100% of wages from commission, however it did not received at least 1½ time the current minimum wage. In this case the employee is due ½ time over time $8 ÷ 2= $4 x 10 over time hrs = $40 over time. Total pay should be $440.

Sample #2
$500 (commission) ÷ 50 hrs = $10 per hrs, in this case the employee received 100% of wages from commission, & his regular rate is at least 1½ time the current minimum wage. In this case the employee is not due over time.

You also need to look at how big is your business in gross annual dollar volume (GADV) gross sales, to determine if you GADV is over $500,000. If the GADV less that $500k then all this information is mute, the minimum wage & over time requirement of the federal FSLA law may not be applicable to you. I do not see how your employees can be individually covered under the law…

See this link for employer coverage…

http://www.dol.gov/esa/regs/compliance/whd/whdfs14.pdf

Thanks for your detailed example. It will be useful. I assume from what i read because i am in Florida and Florida doesn't address the overtime that i use the federal minimum wage for time and one half overtime. The "fact sheets" from the government do not show calculations or examples which makes it hard for the "lay" person to comprehend. Thanks again to everyone for all your help and advise. This site is loaded with knowledge!

Thanks for your detailed example. It will be useful. I assume from what i read because i am in Florida and Florida doesn't address the overtime that i use the federal minimum wage for time and one half overtime. The "fact sheets" from the government do not show calculations or examples which makes it hard for the "lay" person to comprehend. Thanks again to everyone for all your help and advise. This site is loaded with knowledge!

Actually, Florida DOES have a higher minimum wage than federal (it's about the ONLY wage law Florida has) and that is the minimum you have to meet. It's currently $6.79 per hour.
http://www.dol.gov/esa/minwage/america.htm#Florida

To apply the 1½ times the minimum wage test, the federal minimum wage is the one that is applied against. There is no provision to apply the higher state minimum wage. However, if the test is not met, and over time is due, the over time rate is the regular rate which could be the state minimum wage.

To apply the 1½ times the minimum wage test, the federal minimum wage is the one that is applied against. There is no provision to apply the higher state minimum wage. However, if the test is not met, and over time is due, the over time rate is the regular rate which could be the state minimum wage.

So, if Florida has a minimum wage of $6.79, that would be considered the average regular rate and time and one half would be from this number or the federal overtime rate? My understanding was that the calculations would be made at the federal time and a half?

So, if Florida has a minimum wage of $6.79, that would be considered the average regular rate and time and one half would be from this number or the federal overtime rate? My understanding was that the calculations would be made at the federal time and a half?

Possible, because Florida doesn't have an overtime law of it's own.

However, you're going to do nothing with that but tick employees off.

So, if Florida has a minimum wage of $6.79, that would be considered the average regular rate and time and one half would be from this number or the federal overtime rate? My understanding was that the calculations would be made at the federal time and a half?

All these calculations are fine IF your business qualifies as a Retail or Service Establishment. I have difficulty seeing how a landscape company can qualify under this exemption and an argument to that extent would be problematic since commissons to landscape technicians are not the customary practice in the industry. I also find it impossible to determine if you are exempt from the FLSA with the limited information provided, particularly a description of the tasks and duties and equiptment used and sold to your customers. For example, if your employee plants trees for a customer that are resold by you to the customer after being purchased out of state, there is a possibility he/she is involved in interstate commerce and individually covered under the Act. This is regardless of whether the company has $500k in gross earnings for the year.

In short, and more to the point of your calculation of OT, the DOL considers commissions as payments for hours worked that must be included to calculate the employees "regular rate of pay" regardless of whether the commission is the sole source of the compensation or is paid in addition to a salary or hourly rate. This is explained at 29 CFR 778.117.

The "regular rate of pay" is calculated by adding the hourly wage earned + commissions and then dividing by the number of hours worked in a the 7 day pay period. This is the hourly rate of "regular rate." Any overtime time must be 1.5x of that amount. Since commissions vary, this calculation must be performed for each pay period to determien the regular rate of pay.

Ok, here is some more specifics of my business. We are a lawn care company. We apply fertilizer , weed and insect control on a scheduled basis to homeowners and businesses. We do not do landscaping. My business does over the 500k . We are a service business establishment. The industry generally pays it's employees strait commissions or salary plus incentives with fluctuationg work week (chinese overtime). We switched to strait commission a few years ago because "every other competitor was". I checked with the state of florida to make sure i was ok with that and they told me it was fine, just make sure the employees make minimum wage and minimum wage time and a half. That is what we have done. Unfortunately, i'm finding out now that this is wrong. I now find i am in a legal situation regarding the overtime paid. When i calculated the employees overtime he was underpaid $60 over a 7 month period. Not too bad and fortunately my employees do not work that much overtime. Obviously i have to address this legal situation but i am trying to fix the present pay plan so we don't get ourselves in any future problems. I hope all this info sheds a little more light on my situation.

Generally speaking, the definition of "commissions" has to do with making sales.

However, I think it's already been explained very well what you need to do to be compliant with the FLSA.

What "manual labor" exemption? Even if Florida had one, it wouldn't be enforceable, because the FLSA doesn't have such a thing, and the law that provides the greater advantage to the employee is the law that controls.