FLSA2001-2 — Automobile salespersons and section 13(b)(10)

U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

February 14, 2001
FLSA2001-2
Dear
Name*,

This letter is in response to your request for an opinion under the Fair Labor Standards Act (FLSA),
regarding your client’s settling out period of commissions for automobile salespersons who qualify for the
overtime pay exemption contained in section 13(b)(10) of the Act.

The Act applies on a work week basis, and in order to satisfy its minimum wage requirements, an
employee must receive not less than the applicable statutory minimum wage for all hours worked in each
work week without regard to sales productivity. This amount must be paid free and clear. If employees
receive a weekly draw or guarantee of at least the minimum wage for each hour worked, the minimum
wage provisions of the Act will be satisfied. In such a situation, the employer can take credit for this draw
or guarantee when settling out the amount due the employee as commissions earned. This may be done
at the end of the period used to determine the total commissions earned for that period.

You indicate that these automobile salespersons are compensated on a commission basis and paid
weekly with a commission settlement period of one month. Weekly draws against commission are
computed to ensure compliance with the minimum wage requirements. Total sales commissions for each
salesperson are computed at the end of each month, and the amount of each employee's weekly draw is
deducted from the resultant sum. Excess unpaid commissions are then carried forward to the next
settlement period.

It is our opinion that the proposed practice or policy of forwarding unpaid commissions on an indefinite
basis would not violate the FLSA for those sales employees entitled to the exemption under section
13(b)(10) of the Act, as long as the employees actually receive not less than the statutory minimum wage
for all hours worked in each work week. We note, however, that state laws or contractual arrangements
between the employer and sales employees may require payment of their earned commissions within a
specific period and that the settling out of earned commissions within a reasonable period should reduce
potential employment disputes.

This opinion is based exclusively on the facts and circumstances described in your request and is given
on the basis of your representation, explicit or implied, that you have provided a full and fair description of
all the facts and circumstances which would be pertinent to our consideration of the question presented.
Existence of any other factual or historical background not contained in your request may require a
different conclusion than the one expressed herein. You have also represented that this opinion is not
sought on behalf of a client or firm which is under investigation by the Wage and Hour Division, or which
is in litigation with respect or subject to the terms of any agreement or order applying, or requiring
compliance with, the provisions of the FLSA.

We trust that the above information is responsive to your inquiry.

Sincerely,

Thomas M. Markey
Acting Administrator

Note: * The actual name(s) was removed to preserve privacy.

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