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Workers cannot be required to repay draws on commission

The Fair Labor Standards Act provides certain protections to workers in New York, including the establishment of a minimum wage and overtime pay rules. Some salespeople who work on commission are paid draws on their future commissions in weeks in which they do not earn at least the minimum wage. These draws are then deducted from their commissions in subsequent weeks in which their pay exceeds the minimum wage. Recently, a federal court found that these types of pay arrangements do not violate the FLSA.

In a case that was heard by the U.S. Court of Appeals for the Sixth Circuit, retail salespeople who worked for an appliance company were compensated on a commission-only basis. The companies used a draw-on-commission scheme. When workers had weeks in which their commissions did not equal or exceed the minimum wage, they would receive draws against their future commissions to make up the difference. In weeks in which their pay exceeded the minimum wage, the company would be reimbursed.

The plaintiffs sued, alleging that the draw-on-commission scheme was illegal. They also alleged that the company had a policy that unreimbursed draws remaining when the employees left their jobs had to be repaid. The court found that the draw-on-commission scheme was lawful. However, it also found that employees could not be required to repay outstanding draws once they left their employment.

Wage and hour law can be complicated. Workers who believe that they have not been fairly compensated for the work they performed might benefit by getting help from experienced employment law attorneys. If the workers have not been paid the required minimum wage for all of the hours that he or she worked, the lawyers may file lawsuits on their behalf to try to help them to recover the money they are owed.

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Kessler Matura P.C.
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