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Thread: Downsizing. What is the law regarding straight commission jobs? Pennsylvania

  1. #1

    Question Downsizing. What is the law regarding straight commission jobs? Pennsylvania

    We are one of the companies hard hit by the current market downturn. We are having to reduce our staff by about 20%.

    In order to boost sales and offer some options to people who would otherwise not have jobs, I'd like to look at creating some straight commission jobs.

    These would be primarily phone jobs. Call from home or call from work.

    I know that car dealers have straight commission jobs. I want to be totally legal. How do I understand how to set up and comply with legalities?

  2. #2
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    Even if you ARE an auto dealer, AND the employees (and the job) meet the criteria for not having to pay overtime, you STILL have to pay minimum wage.

    "Fully commissioned", with no other compensation, is allowed ONLY for outside salespersons.
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  3. #3

    Default All jobs?

    So there are no inhouse jobs in PA that can be straight commission? Where do I find the rules for outside salespeople?

  4. #4
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    I didn't say they couldn't be paid based on commission. For inside sales, minimum wage (and very probably, overtime pay) is due no matter what method of calculating compensation is used.
    http://www.dol.gov/esa/whd/regs/comp...tsidesales.pdf
    Last edited by Pattymd; 11-06-2008 at 08:12 AM.
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  5. #5

    Default Thank you

    Patty, you have been very helpful. THANK YOU!!!!

  6. #6
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    Agreed with what Patty said. What is a common and legal option is to pay employees a base pay of exactly minimum wage with an optional performance based commission. The one problem with this approach is that for "normal" employees, this requires recalculating overtime. Doable but potentially a lot of work. For certain types of employees, there is an alternative payment method for Retail and Service Establishment exception. Neither method is painless, but commission-only-ignoring-actual-hours-worked simply is not legal for anyone other then the Outside Sales exception. Federal DOL actually has had a very good recent track record of going after employers who try to use the Outside Sales exception incorrectly. Some very big name companies in the mortgage, banking, stock brokers and other industries have collectively been hit with hundreds of millions of dollars in penalties on this issue. Federal DOL has also made something of a push on the misuse of the Administrative exception. On the other hand, there have been conflicting decisions in the Executive exception area, especially with retail store managers.
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