Washington Minimum Wage Law Applies to Employees Working for Commission
The Washington Minimum Wage Act (“MWA”) requires that employees’ wages at least equal the minimum hourly rate. The MWA is fairly straightforward for employees who are paid by the hour. However, the MWA can be complicated when workers are paid by commission or piece rate, because they still must receive at least the minimum wage. Employers who do not follow the MWA could face an unpaid wage claim.
What Does the MWA Require?
The MWA applies to all workers age 16 and older, with some exceptions. The law imposes different obligations on employers based on different pay rates.
-Hourly: pay is based on hours worked. The rate must at least equal Washington’s minimum wage. Unlike other states, employers cannot count tips as part of the minimum wage.
-Commission: pay is based on a percentage of the employer’s profits. For example, a car salesman might earn 10% from each sale.
-Piece Rate: pay is based on production. For example, an employee might receive $0.20 for each gizmo he makes.
In general, employers may pay employees based solely on commission or piece rate. However, the employee’s wages must still at least equal minimum wage for each hour worked. The one big exception to this requirement is outside salesmen who do not work from the employer’s place of business.
How Is Minimum Wage Calculated?
In Washington, an employee’s hourly pay rate is calculated by dividing the employee’s total wages for a pay period by the number of hours the employee worked. The hourly pay rate must at least equal minimum wage. If it does not, then the employer must make up the difference.
For this example, imagine that the minimum wage is $10 per hour:
-Employee A earned $400 while working 40 hours in a pay period. To calculate his hourly rate, divide $400 by 40 to get a rate of $10 per hour.
-Employee B earned $50 while working 10 hours in a pay period. To calculate his hourly rate, divide $50 by 10 to get a rate of $5 per hour.
Employee A’s $10 hourly rate equals the minimum wage, and the employer has satisfied the MWA. However, because Employee B’s $5 hourly rate is less than the minimum wage, the employer must make up the $5 per hour difference.
In general, the MWA entitles employees to overtime pay for each hour they work beyond the normal 40-hour workweek at a rate of one and one-half times their regular hourly rate. This requirement also applies to employees paid by commission or piece rate.
To calculate overtime pay:
-Start by calculating the employee’s hourly pay rate (see above). For example, Employee X earned $600 while working 60 hours in one week. His hourly pay rate is $10.
-Next, determine how many overtime hours the employee worked by subtracting 40 from the total number of hours worked. Employee X worked 60 total hours, meaning he worked 20 overtime hours.
-Calculate one-half of the employee’s hourly rate, and multiply it by the number of overtime hours worked. Half of Employee X’s regular $10 rate is $5. $5 multiplied by 20 overtime hours equals $100 overtime pay that the employer owes.
Unless employees fall under one of the MWA’s exceptions, they are entitled to the minimum wage and overtime pay. Whether you are an employee or an employer, a skilled employment attorney can advise you on Washington’s minimum wage laws and help with claims for unpaid wages.