“OT, Commissions & Hourly Rates: Making Cents of Route Driver Pay” Presented by Heather A. Bailey, Esq. SmithAmundsen LLC November 13, :30am – Noon NAMA Coffee, Tea & Water Show 2013 Gaylord Opryland Convention Center, Tennessee Ballroom B

 By the hour?  With overtime pay?  Commissions only?  Salary only?  Fluctuating Workweek method?

 Trucks 10,001+ GVWR; and affecting interstate commerce: ◦ Many of your vending items are shipped from out of state vendors or distributors and do not “come to rest” in warehouse; or ◦ Routes cross state lines

 S.D. of FLA case – NAMA member fought route driver on MCE & won!  M.D. of TN case – NAMA amicus brief in support of industry on MCE  Countless DOL audit & employee demand letter fights

 Alaska  California  Colorado*  DC*  Hawaii*  Kansas*  Maine  New Hampshire  New Jersey  New Mexico*  New York  Washington

 You do NOT need to pay your route drivers overtime  You may pay them a weekly salary for all hours worked ◦ Be careful of deducting time from salary!!  You may pay them based upon a commission only  You can still choose to pay OT

 Agree to pay $X per hour (at least minimum wage)  Depending on state, pay time and a ½ for those hours worked over 40 in a week or 8 in a day  CANNOT combine weeks to determine or average out  Note: some states require double time

 Agree to pay driver based upon % of commissions  Take commissions for the week, ÷ by hours worked to get hourly rate  Take ½ that rate x overtime hours

 For example, a non-exempt driver earned $1,000 in weekly commissions and worked a total of 48 hours in the week. The employee’s hourly rate for that week is $20.83 (1,000 divided by 48). Thus, the operator needs to compensate this employee an additional $83.32 for his overtime hours ($20.83 divided by 2 = $ (the half rate) multiplied by 8 overtime hours). Collect Sales Monthly?  One way to compute the driver’s overtime rate would be to take the monthly commissions of $2,000 and multiply that by 12 months in the year ($24,000) and then divide that by 52 weeks in the year to give you the employee’s weekly commissions of $ Thus, if the employee worked 48 hours in one of the weeks that month, his overtime would be calculated as follows: $ divided by 48 hours = $9.62 for a regular rate. Thus, the employee’s additional overtime compensation would be $4.81 multiplied by the 8 overtime hours (the hourly rate $9.62 divided by 2 to get the half time rate = $4.81).

 Alternative to paying time and a ½ OT  Only HALF TIME is paid for OT  Much like paying salary but with OT  Must give notice and best to have employee agree in writing  How do we get away with this?

 Agree to pay $X per week guaranteed  Each week take salary ÷ the number of hours worked to get hourly rate  Take ½ the hourly rate x overtime hours

 If a driver makes a fixed salary of $500 per week and worked 45 hours one week, you divide $500 by 45 hours, which equals $11.11 per hour: the employee’s rate for that week for straight-time. You then divide $11.11 by 2 in order to calculate the half-time for the 5 hours of overtime worked, which equals $5.56. Thus, you would owe the employee an additional $5.56 per hour for the 5 hours of worked overtime because he was already compensated straight-time for those hours with the fixed salary.

 You can pay drivers with a combination of pay ◦ Salary or hourly plus commission ◦ Commission plus non-discretionary bonuses ◦ Safety awards or like perks  Any pay that driver is entitled to receive for his work gets included in these “weekly compensation” for hourly rate determination formulas ◦ Not included: gifts, discretionary/holiday bonuses, and premium payments added to hourly wages

 Individual Wage Complaint for wages  DOL Audit  Individual Lawsuit for wages  All can turn into Class Actions for all drivers  Potential damages: ◦ Back pay ◦ Interest ◦ Penalties ◦ Attorney Fees & Costs ◦ Criminal consequences ◦ Headaches & morale

 Determine whether MCE applies or not ◦ If so, determine salary and pay salary each pay period (few exceptions) ◦ Know when you can and cannot deduct for driver not working a full workweek  If not, determine which method you want to pay your route drivers OT ◦ No matter which method, ensure OT is calculated on a weekly workweek basis and ALL applicable comp is included when determining hourly rate  Always ensure driver is paid minimum wage ◦ Check payroll system – many have automatic increase  When in doubt, contact L&E counsel

Heather A. Bailey, Esq. SmithAmundsen LLC Chicago, IL (312) FREE BLOG: mentlawupdate.com

 As a NAMA member, you are entitled to 15- minutes of free Labor and Employment Advice each quarter!  Just call or me.