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Commission versus Minimum Wage California

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  • Commission versus Minimum Wage California

    I work in an insurance office and wanted to know whether or not it is legal to give a sales agent the option of making minimum wage or commissions, whichever is higher?

    So if an agent has a bad month, he can still be assured that he will make minimum wage.

    However, now the office wants to go to Commission only...is this also legal?

    I'm worried because if an agent has a bad month, he'll end up making less than minimum wage.

    Thanks for any response

  • #2
    Paying minimum wage (and overtime) might not be an option, it might be required. There is some things that need to be determined first.
    - Is the worker an employee or an independant contractor (or statutory non-employee)? This might seem obvious, but not everyone who is paid on a commission basis is necessarily an employee.
    - If an employee, then is the subject to the Exempt Outside Sales exception? There is no minimum wage or overtime requirement for such employees.
    - If the employee is inside sales, then there probably is a minimum wage and overtime requirement. If the employer is a Retail Establishment, the rules are a little different then if the employer is not.

    Past that, it is safer to know what the employer's line of work is, and what tasks the employee performs. There are a fairly huge number of possible strange exceptions.
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)

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    • #3
      Thanks for the quick response...yes the agent is an employee...as an insurance agent his primary duties is to solicit clients and sell policies such as auto insurance policies, homeowners, etc...

      So..based on this, the agents probably do not qualify for the Retail Sales Exception?

      So, in general it would be okay to offer them minimum wage or commission whichever is higher as long as we keep track of any overtime and such?

      Thanks

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      • #4
        I am going to assume that we are talking about someone who works in an office and not "door to door". If so, you are required to pay the employee at least minimum wage and overtime. California has tougher overtime rules then federal which must also be followed. I am going to include something from the CA-DLSE Enforcement Manual. If you structure your compensation in a similar fashion, then you have a pretty good idea what CA-DLSE thinks the rules are:

        http://www.dir.ca.gov/dlse/Manual-Instructions.htm

        34.2 Draws Against Commissions. If an employee receives a draw against commissions to be earned at a future date, the “draw” must be equal at least to the minimum wage and overtime due the employee for each pay period (unless the employee is exempt, i.e., primarily engaged in outside sales). Although the draw may be reconciled against earned commissions at an agreed date or when the commission is earned, the draw is considered the basic wage and is due for each period the employee works even though commissions do not equal or exceed the amount of the draws, unless there is a specific agreement to the contrary. (Agnew v. Cameron (1967) 247 Cal.App .2d 619; 55 Ca l.Rptr. 733.) Advances may only be recovered at termination if there is a specific written agreement to that effect and only to the extent that the advances exceed the minimum wage and overtime requirements. (Agnew, supra, and IWC Orders; see also O.L. 1987.03.03, 1991.05.07)
        "Reality is that which, when you stop believing in it, doesn't go away".
        Philip K. **** (1928-1982)

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        • #5
          Originally posted by keandre36 View Post
          So..based on this, the agents probably do not qualify for the Retail Sales Exception?
          Probably not, although I can include a pointer to those rules.

          http://www.dol.gov/esa/regs/compliance/whd/whdfs20.htm
          "Reality is that which, when you stop believing in it, doesn't go away".
          Philip K. **** (1928-1982)

          Comment


          • #6
            Thanks so much DAW...the links were really informative...i think that answers all my concerns...

            Comment

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