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Outside Sales & Commissions Illinois

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  • Outside Sales & Commissions Illinois

    My client (an insurance agent) pays his agents (outside sales) only commission. He considers them to be outside sales because, while he does assign them accounts with monthly sales goals, he does not direct their work nor dictate their hours. If sales are good, they receive a % of the policies that they sold. If sales are not so good and few or no policies were issued, then no paycheck. The paycheck amount can range from 0 one week to thousands of dollars the next pay period. Quite a few employees have quit recently due to the economic downturn, complaining of lack of sales and no paycheck. Does he have to pay them a "base salary" equal to minimum wage at 40 hours a week? The hours they actually work is up to them.

    In addition, the commissions received are considered advances of income as they are subject to a "chargeback" up to 1 year after the policy was issued. So if a policy is issued, and commission is paid to the agent, and now the policy holder changes their mind and cancels, the commission advanced to the employee is due back. Typically the chargeback is applied to any current commissions, thus reducing future pay.

    Thanks.

  • #2
    It sounds like maybe someone is confused between employees vs. independent contractors and exempt vs. nonexempt employees. Are you saying you believe the workers are misclassified as ICs? Or are they employees whom you believe are being misclassified as exempt when they should be nonexempt.

    What is your place in this scenario?

    IF the worker meets the criteria for IC status, then minimum wage, salary, overtime, and basically, nothing relative to wage and hour laws apply.
    http://www.irs.gov/pub/irs-pdf/p1779.pdf

    If the worker does not meet the criteria, he is automatically deemed a nonexempt employee UNLESS the employer can justify, if a complaint is filed, the exempt classification.
    For employees, for the outside sales exemption to apply, the employee has to perform the majority of his work at the client/customer site. The fact that the employer may assign them accounts or leads, and the fact that they control their own hours is irrelevant to this determination.
    http://www.dol.gov/whd/regs/complian...tsidesales.pdf
    I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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    • #3
      My place in this is that I'm the bookkeeper/payroll. They are considered to be employees of the company and the company pays all payroll taxes on them. As employees they are eligible to receive health insurance, at no cost to them. My concern is that due to the recent number of people quitting due to lack of pay (no sales = no commission = no paycheck) that he may be sued for not paying these people at least minimum wage at 40 hours each week. The majority of the work is performed at the customer's site. On occasion they may come to the office and work (primarily to catch up on paperwork or for training/meetings) but the majority is spent at the customer's/account's site. Based on the link provided I have a question regarding the "Away from Employer's Place of Business" requirement:

      Away from Employer’s Place of Business
      An outside sales employee makes sales at the customer’s place of business, or, if selling door-to-door, at the customer’s home. Outside sales does not include sales made by mail, telephone or the Internet unless such contact is used merely as an adjunct to personal calls. Any fixed site, whether home or office, used by a salesperson as a headquarters or for telephonic solicitation of sales is considered one of the employer’s places of business, even though the employer is not in any formal sense the owner or tenant of the property

      Think of it as someone selling car insurance - the company assigns its employees specific car dealerships to generate business from. The employee goes to the car dealership and sets up a desk and for the most part solicits potential sales from that location. The employee has other options and means to obtain business/new sales but for the most part stays at the dealership and works on the walk ins. Does the fact that the employee sets up shop at the car dealership mean that the becomes the employer's place of business, thus the employee is not "away"?


      Thank you.
      Last edited by heliwoman; 04-27-2010, 06:27 AM. Reason: edited to reflect additional questions after reading

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      • #4
        If the company feels it can justify the Outside Sales exemption, then there is NO salary or minimum wage requirement. However, in your example, the car dealership would be the employee's place of business; it is not the customer's place of business and therefore, the employee selling the car insurance would not be an Outside Salesperson.
        I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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