U.S. DOL “Approved” Formula For Paying Overtime
Automobile dealerships must now require service advisors to keep accurate daily time records, including time in, time out to lunch and back, and time out at the end of the day. Regardless of whether the service advisor is paid on a commission basis only or base plus commission, the service advisor will be eligible for overtime pay for work in excess of 40 hours per week and, in California, for work in excess of 8 hours per day. Each service advisor’s “regular rate of pay” will be calculated on salary (if applicable) plus commission. The California Labor Commissioner calculates the regular rate as 1/40th of this amount. Overtime pay will be calculated at 1.5 times the regular rate times the number of hours over 40 or 8, but not both.
The formula below has been sent to the U.S. Department of Labor. The investigator who reviewed it told me that “unofficially” the formula is correct. Now, understand that the DOl is the federal agency that determined that service advisors are not exempt from overtime. I have not seen this from California’s Department of Labor Standards Enforcement however it is easy to assume that they will not be far behind. With this in mind please understand that this formula is being provided as our opinion as to how service advisors should be paid based upon the decision/opinion of the U.S. Department of Labor. Using this formula that pays service advisors overtime is based on that premise. In my opinion using it should be in compliance with any issue ultimately raised by California (or any other state). Simply stated it is always easier to lean toward the benefit of the employee under these circumstances. Does it cost more now, yes, but it will be less costly than facing either the labor board or litigation.
As a final note employers may be making schedule changes in an effort to hold down the costs of the overtime. Employees are not going to be happy. They are going to have to understand that these changes are not your doing but by that of government agencies that are in charge of such matters.
Service Advisor’s Formula
1. Paid Commissions Only
The standard measure begins based on a 40 hour work week. The service advisor
earned $2,000 in commissions for the week. You have to determine the hourly
rate by taking 1/40th of the commissions earned. Once you have determined the
hourly rate you multiply that amount by 1.5 to determine the overtime rate.
Example:
$2,000/40=$50 (regular hourly rate for that week) X 1.5=$75
$75 = overtime rate
2. Base salary plus commissions
The standard measure begins based on a 40 hour work week. The service advisor
has a base of $1,600 per month ($400.00 per week) and earned $2,000 in commissions for the week. You have to determine the hourly rate by taking 1/40th of the base rate (for the week) and of the commissions earned. Once you have determined the hourly rate you multiply that amount by 1.5 to determine the overtime rate.
Example:
$400 (weekly rate)+$2,000(weekly commissions)/40=$60(regular hourly rate for that week) X 1.5=$90
$90 = overtime rate
I just wanted to note that the proposed formula is completely discretionary. As stated above, California has not made any decisions in this area. We have received a number of calls over the past two months or so with concerns about “how to calculate overtime for service advisors?” This formula is being provided in the event that you choose to go in this direction. I do not know of any decision by a California Court that specifically states that employers have to pay overtime to service writers/advisors.
