Employment Law/Commission


I work for an inside team sales company that sells athletic apparel (shoes, jersey's..ect).  We have 15 associates in my position who work with a base salary and paid commission for sales over 1,000,000 for the year at 5% .  We are only able to take bulk orders - no individual. Associates range from 1 Million - 1.5 Million.

I have a customer who orders 25 pairs of shoes at $100. The order total comes to $2,500 and a few days later the customer receives the shoes. Customer calls back because 3 pairs do not fit the kids. and I am not in the office (have assistants there until 9 PM every night and on weekends). The assistant (who is not paid by commission with the company) helps the customer by placing the exchange order for 3 pair totaling $300.

When the customer returns the 3 pairs of shoes they needed exchanged, the company will return it to the original order and my sale is now $2,200. This may not be a big deal for 1 order but over the coarse of the year when you place thousands of orders this can up to a substantial amount.

Is the ok that the company takes the money of your original sale giving it to a non-commission employee? If this affected each employee $50,000 of sales each year that would pay you a commission of $2,500. If you have 15 employees the company would be saving $37,500 in paying commission on orders just because of exchanges. I have worked there for 2 years now and this is always a major discussion between us and management.

Thank you!


That arrangement certainly seems rather unfair; one would think you should still get credit when it's just an exchange rather than a return.  But the law does not govern the precise terms of a commission plan to this extent, so unless you have an individual or union employment contract providing otherwise, the employer is acting lawfully.

The only possible exception would occur if you are a non-exempt sales employee under the Fair Labor Standards Act.  As a sales person, you could be exempt, and thus not covered by the FLSA's minimum wage and overtime requirements, if you meet certain requirements under the law, the primary one being that you are away from the employer's place of operation making sales or doing other work directly related to making sales for a significant portion of your total work time in a given week.  Sales must be your "primary duty", which doesn't necessarily mean you have to spend more than 50% of your time engaged in outside sales and related activity, but I usually advise my clients that at least 40% is a good rule of thumb.

It sounds as if you might fit that category (called the "outside sales exemption"), although I don't really have enough facts to give a good opinion.  In any event, let's assume you are non-exempt, just for the sake of discussion.  In that situation, the employer would violate the law if deductions from your commissions were to result in you making less than the minimum wage for a given week.  The Wisconsin minimum wage is the same as the Federal minimum, $7.25 per hour.  So a non-exempt sales commission employee in Wisconsin must earn at least that amount per hour for all hours worked in a calendar week, and 1.5 times that rate for all hours worked in excess of 40 in a calendar week.  Should commission deductions result in the employee falling below that minimum in a given week, there would be a violation.

Of course, if you are an exempt outside sales employee, none of this is relevant to your situation.  But I thought I would give a general explanation of the rule, just in case.

I hope you find this helpful.  

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Frank C. Magill


I can answer questions about any U.S. labor or employment law question. I cannot answer questions about non-US law. I am not a specialist in employee benefit law (ERISA and HIPAA) or Workers' Compensation law, but will do my best to point questioners toward good resources availabe online. Expertise includes, without limitation, EEO/Affirmative Action/Employment discrimination (Title VII, Age Discrimination in Employment Act, Americans With Disabilities Act, GINA, Fair Credit Reporting Act as applied to employment); Fair Labor Standards Act; Texas labor code; Family Medical Leave Act; employee compensation; discipline and dismissal; force reductions, severance pay programs and administration; collective bargaining, union representation, grievances and arbitration, National Labor Relations Act and National Labor Relations Board; employee handbooks; staffing; dispute resolution outside of traditional labor agreements; employee communications; employment policies and compliance programs; codes of ethics; employment or labor litigation.


30+ years experience as corporate counsel for a Fortune 100 telecom company, specializing in labor and employment law issues. In addition to providing day-to-day advice to my company's internal HR leadership and staff, I've represented the company in numerous labor arbitration cases and at the bargaining table.

Texas, Illinois and Missouri state bars

J.D. 1979, Harvard Law School. B.A., Summa Cum Laude, 1976, Illinois Wesleyan University.

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