In California, the question of whether commission-based employees are entitled to overtime pay is one of the more complex areas of labor law. While the general rule under the Fair Labor Standards Act (FLSA) and California labor law mandates that non-exempt employees are entitled to overtime compensation for hours worked beyond 40 in a workweek, 8 in a workday, or more than 6 consecutive workdays in a workweek, commission-based employees are subject to specific requirements that could impact their eligibility for overtime pay. Under California law, most employees are entitled to overtime pay unless they fall within one of the state’s exemptions. For commission-based employees, determining whether they are entitled to overtime pay hinges on several factors.
To qualify for the inside sales exemption in California, the employee must meet the following criteria:
- The employee’s earnings from commissions must be at least 1.5 times the state minimum wage for each hour worked during each pay period.
- More than 50% of their total earnings must come from commissions.
- The exemption applies primarily to employees in retail, professional, or technical industries.
If these conditions are not met in any given pay period, commission-based employees lose their exempt status and are entitled to overtime pay. It is the employer’s responsibility to track hours and assess pay structures regularly to maintain compliance.
The issue of overtime eligibility for commission-based employees in California is complex and hinges on specific legal exemptions and pay structures. While commission-based employees can be exempt from overtime pay under certain conditions—particularly in sales-related roles—California law places strict requirements on both the pay structure and job duties involved. Employers must carefully assess whether their commission-based employees meet the criteria for exemption to ensure compliance with state and federal overtime laws. Employers should consult with legal experts to ensure proper classification of commission-based employees and compliance with California’s robust labor protections, avoiding costly violations and penalties. If you have any questions please email us at info@mnklawyers.com.
