Is Your Employer Properly Paying Overtime Based On Commissions/Bonuses?

Our Ohio wage attorneys know the law

Are you paid commissions or bonuses at work? You might think these things work to your advantage. But many employers use commissions and bonuses as a way to underpay overtime. Choose Nilges Draher LLC to help make sense of your situation.

The key takeaway: your overtime rate should include all of your compensation

If you receive a bonus or commission payment, there's a possibility that your employer underpaid you overtime. The reason is that these types of payments must be included in an employee's regular rate of pay for purposes of computing the employee's overtime rate.

For example, an employee who is paid $10.00/hour would typically receive $15.00/hour (that is, time and a half) for all hours worked in excess of 40 hours per week. If such an employee worked 50 hours in a week, the total compensation would be $550 - $400 for the 40 hours paid at the regular rate and another $150 for the 10 hours of overtime.

However, suppose such a worker receives a $100 attendance bonus in that 50-hour week. The correct way to calculate the overtime rate in this situation is to first prorate the $100 bonus over 40 hours worked, meaning $80 of the bonus applies to the 40 regular hours. This means the worker has actually been paid $480 for 40 hours worked, effectively raising the worker's hourly compensation to $12/hour, which in turn changes the way the overtime rate is calculated. The overtime rate becomes $18/hour, which means the worker should now be paid $180 for the 10 overtime hours. In other words, this employee is entitled to an additional $30 when the rate is properly calculated.

The law works this way to prevent employers from gaming the system. In theory, an employer could call all compensation in excess of the legal minimum wage a "bonus" in order to minimize the overtime rate. Including bonuses in overtime calculations stops the employer from manipulating the system in this manner and makes sure workers are fairly paid for all of their overtime.

A related issue is that some employees who receive commissions or bonuses are commonly misclassified as salaried and exempt in order to avoid paying them overtime at all. For example, inside salespeople (such as call center employees) who receive commission are nevertheless entitled to overtime - the law only exempts salespeople who go out to meet with customers from overtime. These workers are entitled to be paid overtime at a rate that includes their commission in addition to their base salary.

We can help you recover all of the wages you deserve

If you receive a bonus or commission payment, and work overtime, it is possible that you were paid at the wrong overtime rate (or no overtime at all, if you were also misclassified). Sometimes, this is an honest mistake on the employer's part; in other cases, it's a deliberate attempt to save money. Either way, your rights may have been violated. We can help.

Our wage law attorneys have helped thousands of employees who were paid at the wrong overtime rate recover their underpaid overtime. Schedule an appointment with a legal professional who cares. Contact Nilges Draher LLC today.