New York Commission Pay Laws
Do you work on commission? If commissions make up any part of your salary, the law protects your right to get paid.
Federal, New York state, and New York City laws cover salespeople and those working on commission. These laws protect salespeople from wage theft by their employers, which can be a major problem for workers who receive commission pay.
If you have been the victim of wage theft, including being denied overtime pay, you have legal rights. A New York employment lawyer can help.
What is Commission Pay?
Millions of workers earn commissions as part of their wages. But what does commission pay mean? A commission is an amount of money, usually a percentage, that employees receive for selling goods or services.
Commission based pay can make up a worker’s entire salary, or they might receive a salary plus commissions. Employment contracts determine what the employer owes in commissions.
Understanding NYS commission pay laws can be challenging. An employment lawyer can help you receive the commissions you’re owed.
Employment Contracts for Commission Pay
Commissioned salespeople must have a valid employment contract that includes certain information. Employers are required to provide these contracts to salespeople paid on commission.
The contract must include a description of how wages, salary, drawing accounts, commissions, and all other monies earned and payable will be calculated. They must also state how often the employee will be paid.
If the agreement provides for a revocable draw, the contract must state the frequency of reconciliation.
Finally, the employment contract should state any other details pertinent to the payment of all monies earned, either through wages, salary, commission, or any other means, when the employment relationship ends.
Reimbursing Draws Against Commissions
Salespeople are not required to reimburse a draw against their commission pay UNLESS the employment agreement explicitly states otherwise.
Commission pay laws protect employees from unfair wage practices.
Ending A Contract And Commission Pay
Salespeople are entitled to all “earned” commission pay, even after they quit or are terminated from their position.
Regardless of which party ends the contract, salespeople must receive earned commission pay, which is legally considered wages under labor law and laws for commission pay.
If there is no employment agreement explaining when commissions are deemed “earned,” courts will look at the past dealings between the employer and salesperson.
If there are no past dealings, a commission is considered earned when the salesperson produces a client that is ready, willing, and able to enter into a contract with the employer.
Employers Have Five Days To Pay Commissions
Under New York Labor Law, independent contractors must receive their commissions within five days of the end of their contract, regardless of whether the salesperson quit or was terminated.
Employers who do not pay within that time frame violate commission-based pay laws.
Commission Pay and Overtime
Salespeople who earn a commission may be entitled to overtime. However, overtime laws for commission-based pay can be complicated. An employment lawyer can help explain commission pay laws for overtime.
Outside Salespeople
Outside salespeople are not entitled to overtime pay. However, some employers may misclassify salespeople as outside salespeople to avoid overtime and other benefits.
You are an outside salesperson if:
- Your primary duty is the rental of facilities or the sale of goods and services.
- You work for commissions.
- You “customarily and regularly are engaged outside the employer’s place of business,” meaning you make your sales at the customer’s home or place of business.
However, if you perform other duties apart from outside sales, you may still be eligible for overtime.
Outside sales do not include sales made by mail, telephone, or the internet. In particular, telemarketers are not considered outside salespeople.
It is the employer’s responsibility to keep accurate records that establish these three conditions.
If your employer has not kept adequate records, it cannot use the overtime exemption to avoid paying you overtime.
Further, if these conditions are not met, you are not considered exempt and you are entitled to overtime.
Inside Salespeople
Some inside salespeople are not entitled to overtime because they are exempt under the federal Fair Labor Standards Act (FLSA) and New York Labor Law.
The FLSA exempts particular types of employees, including those employed by a retail or service establishment, provided that more than half of the employee’s total earnings consist of commissions.
Overtime-Eligible Salespeople
If you are not an outside salesperson and you do not fall into one of the exemption categories, you are entitled to overtime.
Commissioned salespeople who spend most of their time at the physical location of their employer, including home offices for remote workers, and who make less than half of their pay from commissions, are entitled to overtime. This means time-and-one-half at your regular hourly rate for every hour over forty in the workweek.
Your employer must calculate your hourly rate from your earnings even if you are not paid by the hour.
How to File a Complaint
A commissioned salesperson has several options if their employer illegally withholds commission pay. Victims of this kind of wage theft and other illegal conduct can recover back pay and unpaid wages.
If your employer has violated the federal Fair Labor Standards Act, you can file a claim with the Wage and Hour Division (WHD) of the U.S. Department of Labor. The WHD will oversee the payment of back wages by your employer. In addition, the Secretary of Labor can file a lawsuit on your behalf seeking back pay and liquidated damages.
For violations of New York law, you can file a claim with the Division of Labor Standards at the New York Department of Labor. Similar to the WHD, the Division of Labor Standards can approach your employer and demand back pay or file a lawsuit on your behalf.
Both agencies provide the claim forms online.
A commissioned salesperson can also file their own lawsuit in court. Under federal and state law, if you win your case your employer must pay your attorney fees.
You do not have to file with an agency before you can take your claim to court.
It is possible to file a claim without an attorney. However, how these laws apply to your particular situation can be complicated.
You may want to speak to a New York employment lawyer before taking action. Charles Joseph, an experienced NYC employment lawyer, offers free consultations for workers with commissioned sales jobs and anyone else who receives commission pay.
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