Dealership settles claims that it failed to pay salespeople in weeks they didn't sell cars
- A Tennessee auto dealership selling high-end automobiles has paid $58,739 to 20 employees to settle claims that it violated the minimum wage and recordkeeping provisions of the Fair Labor Standards Act (FLSA).
- U. S. Department of Labor (DOL) Wage and Hour Division (WHD) investigators determined that Rick Hill Imports Inc. failed to pay sales personnel during workweeks in which they sold no vehicles, causing their pay to fall below the minimum wage for those pay periods, and failed to pay employees for required vehicle manufacture certification training. The company also failed to record the hours that employees worked and didn't display an FLSA poster in an employee work area, DOL said.
- “A commission-based pay practice does not alleviate an employer’s responsibility to pay its employees at least the minimum wage for all hours worked,” DOL’s WHD district director in Nashville said in the statement announcing the action.
Whether a commissioned salesperson is entitled to minimum wage and overtime pay under the FLSA turns on whether they are involved in “inside sales” or “outside sales,” Nicholas Woodfield, general counsel and principal of The Employment Law Group, P.C., told HR Dive in an email. “The distinction may sound innocuous, but when viewed in light of federal regulations governing overtime the answer means that the employee either is or is not an exempt employee under the FLSA,” Woodfield said.
Outside sales employees sell to customers away from their employer's place of business and are exempt under the FLSA, he said. Inside sales are made from the employer's location.
And inside salespeople are exempt from minimum wage and overtime only if certain criteria are met, Woodfield explained. Inside salespeople must be employed by a retail or service establishment; the regular rate of pay must exceed one and one-half times the applicable state’s minimum wage for every hour worked in a workweek in which overtime hours are worked; and more than half the employee's total earnings in a representative period must consist of commissions. Unless all three conditions are met, employers must pay inside salespeople minimum wage and overtime for all hours worked over 40 in a workweek.
“And so, the opportunity to make inside salespeople commissioned is not a panacea for having to pay wages. Rather, it is an opportunity to incentivize inside salespeople that comes with a safety net for the salespeople that employers disregard at their peril,” Woodfield said.
- U.S. Department of Labor After U.S. Department of Labor Investigation, Tennessee Auto Dealership Pays $58,739 in Back Wages
- Code of Federal Regulations Employees Compensated Principally by Commission C.F.R. 779.411 – 779.419