Should commissions be included in computing overtime pay?

When employees are entitled to higher pay
ANDREW Prizler worked as an hourly retail sales consultant at AT&T Mobility Services. Being in sales, he was also paid commissions. In June 2012, Prizler sued his employer, alleging that employer failed to pay him and other employees like him, all wages due, including overtime wages. Additionally, when they worked overtime, the company had a policy of not including their commissions in the calculation of their overtime rate. This resulted in an underpayment of wages due to them.
Employees who work overtime, and are paid an hourly rate plus some other type of compensation (such as a bonus, a commission, or a night differential), are entitled to a higher overtime rate.
How is the overtime rate determined? First, a “regular rate” for computing overtime must be established. For hourly and commissioned employees, the regular rate of pay is computed by totaling all commissions paid for the workweek plus the hourly pay for the workweek, and dividing that by the number of hours the employee worked for that week. The result is the employee’s regular rate, which is then multiplied by 1.5 (time and a half) to derive the overtime rate of pay for every overtime hour worked after 8 and up to 12 hours per day.
For example, if an hourly employee worked 50 hours for the week, is paid $10 per hour, and received a commission of $100 for the week, the employee’s overtime rate should be computed as follows: 50 hours x $10 = $500 + $100 commission = $600 ÷ 50 hours = $12 regular rate. The regular rate of $12 is then multiplied by 1.5. This means that the employee’s overtime rate is $18, not $15. The difference of $3 may not sound a lot, but if employees regularly work overtime and received commissions, the back wages owed can be significant. If the employee worked more than 12 hours for the day, then the “regular rate” must be multiplied by 2, to derive the overtime rate (e.g., $12 x 2 = $24).
Prizler’s employer consistently denied the employees’ claims, and argued that the case should not be certified as a class action. Both sides engaged in litigation and defended their positions. However, prior to trial, and after good-faith settlement negotiations, the parties agreed to settle the case, with the payment of $5,000,000 to the employees.  The settlement is awaiting final approval from the court and is expected to benefit about 2,600 employees. The employer also implemented new policies and methods in the calculation and payment of overtime premiums to its hourly commissioned employees.
A reminder to all employees: Beginning July 1, 2014, California’s minimum wage was increased to $9 per hour. This means that any work of more than 8 hours and up to 12 hours per day must now be paid at the premium overtime rate of $13.50 and no longer at $12. For work of more than 12 hours per day, the double time rate is $18 per hour, instead of $16 per hour. In cases of mixed methods of pay and overtime hours, the “regular rate” for computing overtime cannot be less than the minimum wage required by law, it will be more.
Employees who suspect they may not be correctly paid for all hours worked are more than welcome to consult with an experienced employment attorney to find out if they are owed back wages.

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The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost.  Atty. Sayas’ Law Office is located at 500 N. Brand Blvd. Suite 980, Glendale, CA 91203. You can contact the office at (818) 291-0088 or visit  www.joesayaslaw.com. 

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C. Joe Sayas, Jr., Esq. is trial attorney who has obtained several million dollar recoveries for his clients against employers and insurance companies. He has been selected as a Super Lawyer by the Los Angeles Magazine, featured in the cover of Los Angeles Daily Journal’s Verdicts and Settlements, and is a member of the Million Dollar-Advocates Forum.