Eleventh Circuit: Commissions Paid Only Apply to the Workweek in Which They Are Earned When Calculating Overtime Exemption Status

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April 13, 2017

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In Frexia v. Prestige Cruise Services, LLC, an employee alleged that his employer violated the FLSA because the employee’s compensation—a weekly fixed salary plus sales-based commission—fell below the overtime exemption threshold for certain weeks. The Eleventh Circuit’s review of the case confirmed that pay for work performed each workweek must be counted for that workweek, rather than counted across a span of several weeks, in order to meet the overtime exemption threshold.

Scott Frexia worked 60 hours per week selling cruise bookings for his employer.  He earned $500 per week, plus certain sales commissions.  The district court found it difficult to determine the exact weeks in which Frexia earned commissions, and decided to calculate Frexia’s compensation rate by dividing his annual income by every hour in every week that he worked during the year in order to arrive at an hourly rate sufficient to meet the exemption threshold.

The Eleventh Circuit stated that the district court’s method of calculation was incorrect.  Because the district court averaged out Frexia’s total pay over total hours worked that year, it effectively allocated compensation earned in one time period to another period.

The circuit court stated that hourly compensation must be calculated for each individual week because the FLSA uses the single workweek as the standard for the overtime exemption threshold.  The correct regular rate of pay for the purposes of establishing exemption from overtime requirements must be determined by dividing the total compensation earned during that workweek by the number of hours worked in that same workweek.

Action Items

  1. Train staff who process payroll on the appropriate method of calculating an employee’s regular rate of pay.
  2. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2017 ManagEase, Incorporated.

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