Calculation of Salary Deduction allowed under FLSA
HR_Drew TX
2 Posts
I have a question related to the calculation of a salary deduction allowed under FLSA for an exempt associate's personal absence from work.
I have an inside salesperson who is paid a base salary and an end-of month commission, based on his total department's monthly productivity. It is our understanding that under the FLSA guidelines, we may make a full-day salary adjustment (deduction) when he fails to show for work, as long as he hasn't worked at least part of the day.
MY QUESTION IS: What is the basis for the calculation of the deduction? Is it only the salary for the day, or is it the salary AND a percentage of the monthly commission calculation? If he's absent for 5 working days, that could be as much as a 20-25% commission adjustment.
Note: we are a Texas employer.
I have an inside salesperson who is paid a base salary and an end-of month commission, based on his total department's monthly productivity. It is our understanding that under the FLSA guidelines, we may make a full-day salary adjustment (deduction) when he fails to show for work, as long as he hasn't worked at least part of the day.
MY QUESTION IS: What is the basis for the calculation of the deduction? Is it only the salary for the day, or is it the salary AND a percentage of the monthly commission calculation? If he's absent for 5 working days, that could be as much as a 20-25% commission adjustment.
Note: we are a Texas employer.
Comments
The distinction between inside and outside salesperson for FLSA purposes can be quite tricky – and complex. Texas state law does not addres this issue so we have only the FLSA to guide us. Before you can deal with the question of deduction, you must determine if the employee is exempt or not exempt. Based on the exmept/nonexempt satus different rules apply to deductions. Different rules apply. The basic rule is that outside salespersons can be exempt, inside salespersons usually are not. However this is a basic rule of thumb that can mislead us. Before I address the the situations when inside salespersons can be exempt, of importance is the fact that about a year ago the US. Congress, specifically the House Subcommittee on Workforce Protection, was considering a bill that would have designated inside salespersons as exempt. I do not know the fate of that bill as of today. As to the FLSA without that legislation, it designates three types of exemptions pertinent to an employer of commissioned salespersons. First, a commissioned salesperson might be exempt from overtime pay if covered by an industry-specific or job-specific exemption. For example, salespersons primarily engaged in selling or servicing automobiles, trucks, farm implements, trailers, boats or aircraft. Second, a commission employee could be exempt as "outside" salespersons. This exemption exists if the employee is employed "for the purpose of and who is customarily and regularly engaged away from his or her place or places of business" (strange working but that is how the provision is written) in making sales or obtaining orders. Under this provision, the outside salesperson must spend at least 80% of his time in duties away from the place of business or other than work that is incidental to such off-site work such as preparing order forms or making collections. The third type is the "inside" salespersons who could be exempt under a special exemption for commission-paid employees of "retail or service establishments." This exemption exists when the salesperson works in a "retail or service establishment" as defined by FLSA regulations, receives a regular rate of pay in excess of one and one-half times the applicable minimum wage and, finally, more than half of his compensation consists of commissions on goods or services. Such “inside” salespersons employees usually deal with "big ticket" items, such as furniture, major appliances, radios and televisions.
Stanley P. Santire, JD
As far as a reduction in commission, how have you handled other employees in this classification when they miss a full day of work? Or is this the first incident? If so, it is time to decide and set a precedent of how it will be handled from this point forward. Since it is likely that all employees in this classification will be absent from time to time through out the year, I would not bother with a deduction in commission. Unless of course and employee will actually be on a leave of absence and will be out for weeks. These are the types of considerations you will need to address in your commission program. If your commission program mandates a deduction, I would base each employees part of the total commissions earned on actual number of days worked within the timeframe of earnings. Your commission program should be in writing, including reasons for potential deductions (attendance, etc.) and how the deductions will be calculated. All employees should receive a copy of the commission program for future reference.
Hope this helps!