Most salespeople who work in car dealerships are paid on commission, or receive a base salary plus commissions. A common misconception is that these salespeople are exempt from receiving overtime wages. This is not true. Car salespersons are entitled to overtime pay even when they receive salary and commissions. Salary paid and commissions earned do not count towards the employer’s obligation to pay the salesperson premium overtime pay. The employer must separately pay employees earned overtime wages.
Under Massachusetts law, car salespersons are entitled to overtime. This means that for every hour worked in excess of 40 in one workweek, a car salesperson must be paid at one and one half times their regularly hourly rate. Premium pay for overtime hours is in addition to salary and commissions.
The Department of Labor Standards recently updated its regulations to clarify this rule. According to the DLS, a car dealership must pay its sales staff at least the minimum wage for the first 40 hours they work each week. The minimum wage in Massachusetts is currently $11.00 per hour, meaning that a salesperson who works 40 hours per week must earn at least $360 (before taxes) each week.
If a salesperson earning the minimum wage works more than 40 hours in a week, the employer must pay the employee one and one-half times the employee’s regular rate of pay ($11.00 per hour), or a total of $16.50 per hour for all hours over 40, regardless of how much the employee earns in commissions that week.
If the salesperson instead earns a salary and commissions, the employer must still pay the employee one and one-half times their regular rate of pay. A salaried employee’s regular hourly rate is calculated by dividing the amount of salary received in a week by the number of hours worked in that week. For example, an individual receiving $600 per week in salary who works 50 hours in the week has a regular hourly rate of $12 per hour. The employer must pay that employee $18.00 per hour (1.5 x $12.00) for each hour worked over 40, even if that employee earns commissions that exceed the earned overtime wages.
If an employer fails to compensate its employees for overtime pay, the employer is liable for treble damages, meaning the employer must pay the employee three times the amount of withheld wages.
If you work as a car salesperson and do not receive overtime pay, or receive less than the minimum wage, feel free to call us to speak with an attorney about your rights.