Employers Who Pay Commissions Only Once Per Month May Risk Violating Minimum Wage And Overtime Rules

Employers often pay commissions to their employees only once per month.  However, unless a California employee falls within an administrative, executive, or professional exemption, the employer must pay that employee at least twice per month.  While it is acceptable to pay commissions only once per month, each pay period must still meet either the minimum wage & overtime requirements, or meet the commissions exemption (1.5 times the minimum wage) for employees covered by certain Wage Orders.

The California Supreme Court recently held that Time Warner Cable failed to properly pay an employee where it paid commissions once per month and wages for hours worked twice per month.  The employee worked sometimes in excess of 48 hours in a pay period for which the paycheck did not include commissions, and the result was that she was not paid minimum wage for all 48 hours. Time Warner argued that the commissions paid once per month should count toward both pay periods in that month, for purposes of meeting the commissions exemption and the minimum wage / overtime rules.  The court disagreed and held that commissions paid in one pay period cannot be used to satisfy the minimum wage and overtime requirements of a different pay period.

What does this mean for employers? For employers who pay commissions once per month, they should carefully review whether, for each pay period, employees are being paid at least minimum wage and overtime for all hours worked, without applying commissions paid in a different pay period.

© Alexandra M. Steinberg 2016 All rights reserved.