Commissioned Salespeople & The Fair Labor Standards Act: Non-Compliance is a Costly Matter

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Many employers erroneously believe that there is a general exemption from the minimum wage and overtime requirements for so-called "commission? sales employees. While this is true under Maryland law ? the state minimum wage and overtime requirements do not apply to individuals who are compensated on a commission basis ? no such broad exemption exists under the Fair Labor Standards Act. The FLSA does provide certain limited exemptions from both minimum wage and overtime for ?outside salesmen?; the FLSA also provides a limited exemption from overtime (but not minimum wage) for commission employees of ?retail and service establishments.? Qualifying for either of these exemptions, however, is much more difficult than employers realize. Moreover, even assuming that an employee?s job responsibilities make him or her eligible for the exemption, the wage payment structure that can be required by the FLSA for these employees is quite complex and often misapplied by employers. As a result (and perhaps because liquidated damages and attorneys? fees are recoverable by an employee in a successful wage payment action), there has been a recent flood of claims on behalf of employees who were compensated on a commission basis and who assert, often correctly, that they were underpaid. Therefore, it is critical that counsel for employers and employees understand exactly what is required.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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