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Illinois - Commissioned Employees

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  • Illinois - Commissioned Employees

    I posted this in the overtime listing but probably wrong area?

    I have recently found out that some of my employees who are commission only are not receiving the DOL minimum of Minimum wage time and a half. I was not aware of this before because I did not actually pull the commissions. They are however, employees who are on benefits working 30 hours per week.

    I have a couple of questions if someone would be so kind to help:

    1. Can this amount be averaged? For example, if one month someone makes 2x the amount but the next month falls short can that average?

    2. If I have to term someone but then 1099 them due to this factor, or keep them on do I need to go back and make up all the short pay that I was unaware of? Because that is amounting to a LARGE amount.

    Thank you in advance.
    Last edited by chitownhr; 06-08-2010, 12:17 PM.

  • #2
    1. Under federal law, both minimum wage and overtime are calculated on a workweek basis. For each workweek, legally you must pay at least minimum wage (on average).

    2. The chance that you can legally 1099 an employee is close to zero. If you issue a 1099, then legally you are saying that the payment is unrelated to the worker ever being an employee. Worse, issuing a 1099 and a W2 to the same employee is not illegal on it's face, but is an audit flag. And if you are audited, IRS will almost certainly say that the payments were wage related (W2), and that you failed to withhold taxes, meaning penalties.

    3. Minimum wage is federal DOL and the FLSA law. 1099/W2 and tax withholding are IRS and the IRC law. Meaning two unrelated agencies and two unrelated laws.
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)

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    • #3
      Sad part is these people should have always been 1099 and not employees. They are not treated as employees and are very independent and should have always been 1099's, hence the low commission.

      Answer #3 is not related to my question although I do appreciate it. What I was asking is that if we choose to keep someone on as an employee do we need to go back and make up all that back pay that was under minimum wage (I see I also added in the 1099 in there).

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      • #4
        You should if you want to avoid a full-blown audit, once an employee, or former employee, files a wage claim.

        Why exactly do you think they should have been ICs?
        I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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        • #5
          There is no such thing as minimum wage for independent contractors (what you are calling 1099). That is an employee only rule that is part of the federal FLSA law.

          http://www.dol.gov/whd/regs/compliance/whdfs13.pdf

          http://www.irs.gov/businesses/small/...=99921,00.html
          "Reality is that which, when you stop believing in it, doesn't go away".
          Philip K. **** (1928-1982)

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