Commission sales in PR: is overtime owed to you?

Three conditions, and all three must hold

If you sell on commission at a furniture store, a car dealership, an electronics shop or any retail business in Puerto Rico and you are told "commission people don't get overtime," the sentence is incomplete. There is an exemption that allows it (**FLSA Section 7(i)**) but the employer must meet three conditions **at once**:

The U.S. Department of Labor puts it in one line worth memorizing: **unless all three conditions are met, the Section 7(i) exemption does not apply**, and overtime premium pay is owed for all hours worked over 40 in a workweek at time and a half the regular rate.

Note that the employer **elects** to use this exemption. It is not automatic just because you sell on commission. And if the employer elects it, the burden of showing the three conditions were met rests there.

• That you are **employed by a retail or service establishment**.
• That your **regular rate of pay exceeds one and one-half times the applicable minimum wage** for every hour worked in a workweek in which overtime hours are worked.
• That **more than half your total earnings** in a representative period consist of commissions.

The figure that decides in Puerto Rico, and why it comes down to cents

The federal fact sheet says "one and one-half times the applicable minimum wage" without specifying which one. The statute is more precise: **29 U.S.C. § 207(i)** requires the regular rate to exceed "one and one-half times the minimum hourly rate applicable to him under section 206"; that is, the FLSA's own minimum, today **$7.25 an hour**.

One and a half times $7.25 is **$10.875 an hour**, read in practice as $10.88. And here is the fact that makes this guide unique: **Puerto Rico's minimum wage is $10.50** under Act 47-2021.

Set them side by side. A commission salesperson in Puerto Rico whose regular rate is the island minimum ($10.50) does **not** exceed the $10.875 Section 7(i) demands. It falls short by under forty cents, and with that the exemption does not apply and time and a half is owed past 40 hours. In no U.S. state does the local minimum sit as close to this exemption's federal bar as it does here.

There is a second reading that also has to be said: if the fact sheet's "applicable minimum wage" were read as the minimum that actually governs you in Puerto Rico ($10.50) the bar would rise to **$15.75 an hour**. The official source does not resolve which reading controls, so we will not invent an answer. What holds under either reading is the floor: **if your regular rate does not exceed $10.88, the pay test fails and the exemption collapses**. You can compute that tonight with your own pay stub.

One warning about the calculation: the regular rate is not just your hourly tag. The fact sheet explains the employer may divide total earnings attributed to the pay period by total hours worked in that period; if the result is greater than time and a half the minimum wage, that condition is met. Commissions count inside those earnings, so a strong month can pass the test and a slow month can fail it.

"More than half in commissions" and the representative period

The third condition is the most misread. It is not enough to be paid some commission: **more than half** your total earnings must come from commissions, measured over a representative period.

That period **may be as short as one month, but no longer than one year**, and the employer must select it (a period that typifies the employee's earning pattern) in order to show the condition was met.

The fact sheet gives both the shortcut and the long way. If you are paid **entirely by commissions**, or by draws and commissions, or if commissions are **always** greater than salary or hourly amounts paid, the condition is treated as met. If you are not paid that way, the employer must **separately total** your commissions and your other compensation over the representative period: total commissions must exceed total other compensation.

This is where many common Puerto Rico arrangements fall apart: a decent base salary with commission on top, where commission is the extra and not the bulk. If base pay outweighs commission over the period, the condition is not met and the exemption does not apply, however much the job is called "commission sales."

Tips are not commissions. Service charges, sometimes yes

This distinction is worth gold in Puerto Rico, where tourism and food service employ tens of thousands and where the two concepts get confused constantly, sometimes carelessly and sometimes not.

The federal fact sheet is blunt in one direction: **tips paid to service employees by customers may never be considered commissions** for purposes of this exemption. Never. However much they add up to and however they are shared.

In the other direction it opens a narrow door: hotels, motels and restaurants may levy **mandatory service charges** on customers representing a percentage of amounts charged for services. If part or all of that service charge is paid to service employees, **that payment may be considered commission** and, if the other Section 7(i) conditions are met, those employees may be exempt from overtime premium pay.

The practical difference is large and it is settled on the pay stub: a mandatory service charge the establishment collects and distributes is not the same as a tip the customer chooses to leave. If both are mixed at your job, look at how they are itemized. Tips have their own rules, including the tip credit and the cash minimum, which we cover separately.

What a "retail establishment" is and why the word "establishment" matters

The first condition looks like the easy one and it is not. The fact sheet defines retail and service establishments as those in which **75% of 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**.

Two parts: not for resale, and the industry itself recognizing it as retail. A business selling mostly to other businesses for resale does not qualify, however many counters it has.

And the word "establishment" has an edge. The fact sheet carries an example worth keeping in mind: an employee hired by the **central office** of a retail chain as a sales instructor, working across the chain's various establishments, is **not** covered by the exemption, because that employee is employed by the central office and not *by* the retail establishment. In Puerto Rico, where many chains run corporate offices in the metro area and stores across the island, that nuance decides real cases.

The records, and why Act 379 does not pick you up

The regulations require the employer to keep **accurate records of hours worked each workday, hours worked each workweek, and earnings and wages paid**. The fact sheet spells out the consequence plainly: **without records of hours worked and earnings, the employer will be unable to substantiate that all conditions of the exemption were met**. That detail cuts in the employee's favor, and it is one more reason to keep your own record of hours starting today.

That leaves the question almost nobody asks: if the FLSA leaves you out, does Puerto Rico law pick you up? **Act 379 of May 15, 1948** sets an eight-hour day and forty-hour week and requires time and a half (Art. 6, 29 L.P.R.A. § 274). But its **Article 13 (29 L.P.R.A. § 285)**, in the text in force under the April 15, 2024 revision, says the law **shall not apply** to "employees, occupations or industries exempt from the overtime provisions of the Fair Labor Standards Act", subsection (f).

So: when the federal exemption genuinely applies, the local protection falls with it. The two travel together, and that is the underlying reason to check the three conditions carefully instead of accepting the line that "commission people don't get overtime."

And in reverse, which is the good news: if the exemption does **not** apply (because your regular rate does not exceed $10.88, because base pay outweighs commission, or because the business is not a retail establishment) then not only does federal time and a half over 40 weekly hours come back, so does Act 379's protection, under which hours past **eight in a day** are already overtime.