Commission Overtime Exemption

You may already know that there are two categories of pay when it comes to overtime, called “exempt” and “nonexempt.” The word “exempt” means freed from or not subject to an obligation, liability, tax, etc.

To be an employee who is exempt from overtime means that if you work more than 8 hours in a day or 40 in a week, you don’t get paid at time-and-a-half rate for the extra hours. If you are nonexempt, it means that you do get paid time-and-a-half for any hours over 8 in a day or 40 in a week.

An employee that earns commission is paid overtime or not paid overtime depending upon whether or not their commissions are more than 50% of their regular earnings. If commissions are more than 50% of the regular earnings, then that employee is exempt from being paid overtime. If commissions are less than 50% of the regular earnings, then that employee is nonexempt and is paid overtime.

According to California Employment Law, we must calculate whether an employee that earns commission is exempt or not exempt from overtime on a weekly basis. In summary, you could be exempt from overtime one week and then not exempt the next week. California’s labor laws are a little crazy!