Companies will sometimes take a chance on a new (or old) salesperson by allowing him/her to work on pure commission. This “eat what you kill” compensation system seemingly creates an incentive to sell with little risk to the company. But is there really little risk? There is a real and potentially expensive risk of violating the Fair Labor Standards Act (FLSA) and/or state wage hour law.
As a general principle, the FLSA requires employers to pay an overtime premium of one and a half times the employee’s regular rate for all hours worked in excess of 40 within a workweek and to also pay at least the minimum wage for all hours worked. However, the FLSA establishes certain exceptions to these requirements. If the employee does not fit within an exception, then the employer must comply with the FLSA.
