Refund/Pay Deduction

[Sherwood]

My wife works for an entertainment company and earns commission based on the number of talent the company signs. Anytime a client demands a refund, the corporate office always grants it eventhough the client has signed off that they understand the agreement they are entering into. Once corporate grants the refund, they deduct the commission that my wife earned from her next pay check. Is this legal??? To make it worse, she has worked in mulitple offices, and if a client signs with an employee that she has replaced and then the client recieves a refund while my wife is holding that position, they take the commission out of her check. This can't be legal??? she never had the opportunity to earn that commission.

Please Help!!!

 

[Patricia_Young]

What exactly does she do to earn this commission and where does she do it? Is there a written commission plan/agreement? And she is an employee, not an independent contractor, correct?

It might be legal; not enough to say yet.

 

[Sherwood]

She gives an "Open Call" to about 60-70 people everyday. After the open call she goes through a series of three interviews to determine if the talent is marketable or not. If they can market the talent and the talent is interested, the talent pays to join the company. My wife makes 10% of that signing. She is an employee of the company with NO written commission plan or agreement. She does this job in the company office and has worked in Chicago and New York. I hope this helps.

 

[Patricia_Young]

It's possible that she might be exempt under the Administrative classification. Is ALL of her pay commission or does she get a salary?

 

[Sherwood]

Her compensation is Commission vs. Base. She has never made her base so she is 100% commission.

 

[Patricia_Young]

OK, then without a guaranteed salary (which can be docked only in very limited situations), she would not be an exempt employee, even if her duties met the criteria.

So, that means that 1) hours worked must be tracked; 2) on a workweek basis, she must average at least minimum wage for all hours worked and; 3) she must be paid overtime for all hours worked in excess of 40 in a workweek at her regular rate of pay, which is her gross commission for the week divided by her total hours worked.

Here's an example of overtime calculation:
Commission for the week: $500
Hours worked: 60
Regular rate of pay: $8.33
Overtime premium (straight-time portion is already in the $500 figure) = $8.33 * 20 hrs *.5 = $83.30
Total gross pay due = $500 + $83.30 = $683.30
Anything less than that would be a violation of the FLSA requirements regarding overtime pay for commissioned employees.

Note that the "regular rate of pay" calculation must equal at least minimum wage and, if it does not, there is a violation of law. That calculation would be made after the adjustment to commissions you described had been made.

So, having said that, if the above requirements are all met, she has a contract issue, not a wage and hour issue, and the fact that there is NO written plan or agreement does not bode well for her. She can certainly discuss this situation with an employment law attorney, though; might be worth the consultation fee if nothing else.