Is it legal for my employer to say commission means no overtime?
Published September 24, 2026
The short answer
Being paid on commission does not by itself switch off overtime pay. Federal law has a narrow exemption for some commissioned employees of retail and service businesses, and the U.S. Department of Labor sets out three conditions that must all be met before an employer can use it. Where any one of the three is missing, the Department says overtime premium pay applies to hours past the weekly limit at time and one-half the regular rate.
The sentence “commission people don’t get overtime” is describing one part of a rule and presenting it as the whole. The federal overtime section opens with the ordinary requirement, and the exemption for commissioned employees is a separate provision with conditions attached to it.
What follows quotes the statute and the Department of Labor’s fact sheet rather than summarizing them, because the summaries are where the conditions go missing.
Does being paid on commission mean no overtime?
The starting rule is the same for a commissioned worker as for anyone else. The overtime section of the Fair Labor Standards Act, 29 U.S.C. § 207, opens at subsection (a)(1) with a single sentence, quoted whole below.
Nothing in that sentence turns on how the pay is calculated. The words “except as otherwise provided in this section” are what the commission argument has to get through, and the provision they point at is subsection (i).
“Except as otherwise provided in this section, no employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.”
What are the three conditions of the commission exemption?
Subsection (i) is an exemption with conditions, not a category of worker. The Department of Labor’s Fact Sheet #20 sets them out together, and the sentence that introduces them is part of the rule: it is an employer’s election, and it comes with conditions.
So “commission people don’t get overtime” describes the third condition on its own. The Department’s wording is that all three have to hold at once, and the second one is measured week by week — it is written against “every hour worked in a workweek in which overtime hours are worked”, not against a job title.
“If a retail or service employer elects to use the Section 7(i) overtime exemption for commissioned employees, three conditions must be met: 1. the employee must be employed by a retail or service establishment, and 2. the employee's regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked, and 3. more than half the employee's total earnings in a representative period must consist of commissions. Unless all three conditions are met, the Section 7(i) exemption is not applicable, and overtime premium pay must be paid for all hours worked over 40 in a workweek at time and one-half the regular rate of pay.”
What does “retail or service establishment” mean?
The same fact sheet says what the first condition is about, in the sentence quoted below. This page describes the general federal rule and cannot say which of these fits any particular job.
“Retail and service establishments are defined as establishments 75% of whose annual dollar volume of sales of goods or services (or of both) is not for resale and is recognized as retail sales or services in the particular industry.”
How is the second condition worked out?
Two of the three conditions are arithmetic on figures a worker can write down. On the second, Fact Sheet #20 describes the method, quoted below: pay for the period divided by hours worked in it, and the result compared with a multiple of the applicable minimum wage.
“To determine if an employer has met the 'more than one and one-half times the applicable minimum wage' condition, the employer may divide the employee's total earnings attributed to the pay period by the employee's total hours worked during such pay period. If the result is greater than time and one-half the minimum wage, this condition of the exemption has been met.”
How is the third condition measured, and what cannot count as commission?
The third condition compares commission with total earnings over a period the employer selects, and the fact sheet’s words on that are below. It also rules one thing out entirely: “Tips paid to service employees by customers may never be considered commissions for the purposes of this exemption.”
“The representative period for determining if enough commissions have been paid may be as short as one month, but must not be greater than one year. The employer must select a representative period in order to determine if this condition has been met.”
What records does the fact sheet say an employer has to keep?
Under the heading “Typical Problems”, Fact Sheet #20 says the following about records. It is the reason a worker’s own dated record of hours and pay is worth having: the exemption is tested against exactly those two things.
“Regulations require that employers maintain accurate records of hours worked each workday, hours worked each workweek, and earnings and wages paid. Without hours worked and earnings records, the employer will be unable to substantiate that all conditions for the exemption have been met.”
Does the state change the answer, and who can be asked?
It can. Whether a state adds rules of its own — a different minimum wage figure, daily overtime, or its own rules about when a commission counts as earned — depends on the state, and the state labor department is the place to ask.
For the federal side, the Wage and Hour Division answers questions from workers directly. The fact sheet gives its number, quoted below.
“the toll-free information and helpline at 1-866-4USWAGE (1-866-487-9243), available 8 a.m. to 5 p.m. in your time zone.”
What is worth writing down?
Hours, by day and by week. Start and finish times for each day, and the total for each workweek — including the weeks that came in under the weekly limit, because the second condition is tested one workweek at a time.
Every dollar of each pay period, split by kind. Commission separately from salary, draw, hourly pay and bonuses, with the pay period’s start and end dates. The third condition compares those two totals over a period of at least a month.
Anything in writing about how the commission works: the plan or rate sheet, the pay period it is measured over, and any message or email describing the arrangement, with the date it was received.
Where this is decided
U.S. Department of Labor, Wage and Hour Division
Ask the Wage and Hour Division how the federal overtime rules apply to the work described, and whether the exemption for commissioned employees of retail and service establishments covers it — that is the question this page cannot answer. Contacting the division does not require an attorney, and a state labor department is the only place that can say what its own rules add.
Contact detailsSources read for this answer
- 29 U.S.C. § 207 — Maximum hours (subsections (a)(1) and (i))
Office of the Law Revision Counsel, U.S. House of Representatives · 2024 Main Ed. (1/6/2025) · read September 24, 2026
https://uscode.house.gov/view.xhtml?req=%28title%3A29+section%3A207+edition%3Aprelim%29
- Fact Sheet #20: Employees Paid Commissions By Retail Establishments Who Are Exempt Under Section 7(i) From Overtime Under The FLSA
U.S. Department of Labor, Wage and Hour Division · Revised July 2008 · read September 24, 2026
https://www.dol.gov/agencies/whd/fact-sheets/20-flsa-commissions-retail
About this answer
What is written above is general information about a rule that exists. It is not written about anybody's particular job.
It does not say what any particular employer owes anyone. That turns on facts this page has never seen — the hours, the agreement, the state the work was done in — and on how somebody with the authority to decide reads them.
Rules differ from one state to the next, and they change. Every quotation above says what that document said on the date printed beside it, which is not the same as saying what it says today.
Where anything on this page and the official source disagree, the official source is the one that counts. The office named further up decides; this page only points at it.
Whichever way that goes, the thing an agency, a union or an attorney asks for first is a dated record of what actually happened, written down while it was happening.
Keep your own record of it
Take one week where the hours went past the weekly limit. Write down the hours actually worked that week and every dollar paid for that week, then divide the pay by the hours — that division is the one Fact Sheet #20 describes for the second condition. Then line up the last few pay periods and mark which part of each was commission and which was not.
Start your recordFree to start, and no account until you choose to keep it. Private to you — nobody is contacted or notified.