Car-X works overtime to defend its commission-based technician pay plan

The Fair Labor Standards Act (FLSA) is the bedrock federal statute governing how employers must compensate employees including their hourly, nonexempt workers, who must be paid one and one-half times their regular rate of pay for hours worked in excess of 40 in a given workweek. The Act contains a host of exceptions, however, to the requirement that covered workers be paid extra for overtime work. One exception exempts retail and service employees who received bona fide commissions. The U.S. 7th Circuit Court of Appeals (which covers Illinois) recently did a deep dive into the issue and held for the first time that a guaranteed wage floor without a claw-back provision doesn’t negate the bona fide commission exception.

Tapping the brakes

Auto repair technicians Tom Reed and Michael Roy work at Car-X shops, which are operated by Brex, Inc. They sued the company on behalf of themselves and other techs in Illinois and Missouri, claiming its payment plan isn’t a true commission plan. Instead, they claim they are actually paid under the FLSA on an hourly basis and are therefore entitled to overtime pay. Brex defended the claims, explaining its complex payment system is a bona fide commission plan based on each tech’s sales during a pay period.

The FLSA’s bona fide commission exemption applies to employees in retail and service establishments if (1) an individual’s regular rate of pay exceeds one and one-half times the statutory minimum wage and (2) more than half the person’s compensation comes from bona fide commissions on goods or services. The statute further provides: