Loading Episode...
People Processes - Rhamy Alejeal EPISODE 27, 9th September 2020
Can I Pay My Commercial Drivers Commission Only?
00:00:00 00:13:24

Can I Pay My Commercial Drivers Commission Only?

[youtube https://www.youtube.com/watch?v=t2Q8P2LF124]

The Department of Labor has posted a clarification letter about the FLSA and addresses the question of whether commercial drivers can be paid solely on a commission basis.

The FLSA exempts from its overtime pay requirements certain employees of “retail or service establishment[s]. The exemption applies to any employee:

  • who works at a retail or service establishment,
  • whose employee’s regular rate of pay exceeds one and one-half times the applicable minimum wage in the workweek in which he or she works overtime, and
  • whose earnings in a representative period consist of more than 50% commissions

The United States Supreme Court recently held that exemptions under the FLSA deserve a “fair (rather than narrow) interpretation” because the exemptions are “as much a part of the FLSA’s purpose as the overtime-pay requirement.” Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134, 1142 (2018) (internal quotation marks and citation omitted). Accordingly, WHD must apply a “fair reading” standard to all exemptions to the FLSA—including the Section 7(i) exemption addressed in this letter.

The client who sent in the letter employs truck drivers from three different establishments and pays the drivers solely on a commission basis to transport fluid waste from customer oil field locations to disposal facilities. The client pays each driver 27% of the gross revenue received by the client for each truck driven regardless of how many hours are worked each week. Each driver works approximately 60 each week scheduled as 12-hour shifts, five days a week.

The inquiry letter represents that the regular rate of pay for each driver exceeds one-and-one-half times the federal minimum wage. The truck drivers qualify for the Section 7(i) exemption if the client is a retail or service establishment.

To qualify as a “retail or service establishment,” (1) your client must “engage in the making of sales of goods or services”; (2) “75 percent of its sales of goods or services, or both, must be recognized as retail in the particular industry”; and (3) “not over 25 percent of its sales of goods or services, or of both, maybe sales for resale.”

The letter by the Department of Labor concludes that the client—provided that they provide waste removal service, has services that are recognized as retail within the waste removal industry, has trucks that are not that different from what is used for the general public and uses a quantity that is relatively similar to that of a retail service provider—would qualify as a retail or service establishment. Their employees would, therefore, be exempt. If not, they need to track the hours of their workers as they will be entitled to overtime and minimum wage payments.