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Commissioned Retail Sales Employees
Practical Law Glossary Item w-002-4631 (Approx. 4 pages)
Glossary
Commissioned Retail Sales Employees
Classification of employees exempt from the overtime pay requirements of the federal Fair Labor Standards Act (FLSA) (29 U.S.C. § 207(i); 29 C.F.R. §§ 779.410 to 779.421). The exemption is sometimes referred to as the Section 7(i) or inside sales exemption and is distinct from the FLSA's outside sales exemption.
To qualify for the commissioned retail sales exemption, an employee must:
- Be employed by a retail or service establishment.
- Have a regular rate of pay that exceeds 1.5 times the applicable minimum wage.
- Receive commissions on the sale of goods or services that equal more than half of their total earnings for a representative period.
(29 C.F.R. §§ 779.410 to 779.421.)
Generally, an employer is a retail or service establishment if it:
- Derives 75% of its annual dollar volume of sales from goods or services (or both) that are not for resale.
- Is recognized as retail or services establishment in its industry.
When determining if more than half the employee's compensation is commissions, the representative period must be:
- Truly representative of the employee's typical earning pattern. Periods that reflect only seasonal or temporary earnings fluctuations are not likely to be representative of the employee's actual compensation.
- A period of at least one month. Employers may use a longer period, such as a calendar or fiscal quarter, but a period longer than one year is unlikely to qualify as representative.
For more information about the commissioned sales employee exemption, see Practice Note, Sales Exemptions Under the FLSA: Commissioned Retail Sales Exemption.