Commission Pay Laws in Indiana: Your Rights as a Commission Worker

Under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 206 et seq., all employees—including those paid on commission—must receive at least the federal minimum wage ($7.25/hour as of 2024) for all hours worked. The FLSA does not prohibit commission-based pay; however, employers must ensure that when commissions are averaged over the pay period, the employee's effective hourly rate does not fall below minimum wage. Overtime requirements under 29 U.S.C. § 207 also apply to commissioned employees: if they work over 40 hours per week, overtime compensation (time and a half) must be paid on those excess hours.

The FLSA allows commissions to be counted toward overtime pay, but the calculation can be complex. An employer paying on commission must ensure the employee's total compensation divided by total hours worked meets minimum wage, and separately calculate overtime based on the regular rate of pay under 29 U.S.C. § 207. The Equal Employment Opportunity Commission (EEOC) enforces these protections. Commission agreements should be clear and in writing to avoid disputes; the Department of Labor enforces FLSA compliance and investigates wage and hour violations.

Indiana's commission pay rules are found primarily in Indiana Code § 22-2-1-2 (defining wages to include all earned compensation) and § 22-2-9-1 (requiring timely payment of wages). Indiana law does not contain a specific statute regulating commission agreements or commission structure; instead, commissions are treated as wages and fall under the state's general wage and hour laws.

Under Indiana law, commissioned employees are entitled to the state minimum wage, which aligns with the federal minimum wage of $7.25/hour as of 2024 (Indiana Code § 22-2-2-1). This means an employer cannot pay an employee solely on commission if doing so results in earnings below minimum wage. If an employee works 40 hours in a week and earns $200 in commissions, but $200 ÷ 40 hours = $5/hour, the employer violates Indiana wage law and must make up the shortfall to reach $7.25/hour.

Indiana Code § 22-2-9-1 requires all wages to be paid by the next regular payday established by the employer. Unlike some states, Indiana does not mandate that commission agreements be in writing, though doing so is highly advisable to prevent disputes. The state law is aligned with federal minimums but offers no additional protections beyond the FLSA baseline. Remedies under Indiana law include wage claims filed with the Indiana Department of Labor, which can order restitution, and civil actions for unpaid wages under Indiana Code § 22-2-9.

Indiana law contains no broad exemptions specifically for commission-paid employees. However, several important exceptions apply:

Independent contractors are not employees under Indiana law and are not entitled to minimum wage or wage payment protections. An individual is an independent contractor only if they meet all prongs of the common law test: control over the work, method and means of performance, ability to work for others, and the right to profit or loss. Misclassifying an employee as an independent contractor to avoid commission payment requirements is illegal.

Executive, administrative, and professional employees may be exempt from some wage protections under the FLSA if they meet specific salary and duties tests (29 U.S.C. § 213). However, Indiana has not created additional state-level exemptions beyond these federal categories. An employer cannot simply exempt a commissioned employee from minimum wage by calling them "management" or "sales staff" if the exemption criteria are not met.

At-will employment doctrine in Indiana (common law, not codified) means employers can terminate employees for any lawful reason, including poor commission performance. However, this does not eliminate the obligation to pay earned commissions due before termination. Many commission disputes arise after termination when employers dispute whether commissions were "earned" or "contingent" on continued employment or client retention. Indiana courts generally require commissions to be paid if they were earned under the agreement's terms, even if the employee is terminated.

Step 1: Document all commission earnings carefully. Keep copies of sales records, contracts showing commission terms, written communications about commission rates, paystubs showing what was paid, and records of hours worked. If commissions were promised verbally, write a detailed note immediately after the conversation documenting the date, person involved, specific commission percentage or amount, and what triggered the commission. Save emails, text messages, or any written confirmation of commission terms. If you suspect you should have been paid minimum wage and commissions did not reach that threshold, calculate: (total commission earned) ÷ (total hours worked) to show the hourly rate fell below $7.25.

Step 2: Raise the issue internally with your direct supervisor or HR department in writing. Send an email to your manager and HR stating: the specific commissions you believe are owed, the dates they should have been paid, the original terms under which they were promised, and what you request (payment by a specific date). Keep a copy. Ask for a written response. This internal step creates a paper trail and may resolve the issue quickly. Many employers will correct inadvertent errors once formally notified. If your employer ignores the request or denies liability, proceed to Step 3.

Step 3: File a wage claim with the Indiana Department of Labor, Wage and Hour Division. Visit the Indiana Department of Labor website (www.in.gov/dol) or call 317-232-2655. You can file online or by mail. You will need: your name, address, phone number, employer name and address, dates of employment, specific commission amounts owed and dates promised, the original commission agreement (or description if verbal), and paystubs or records showing what was paid. The filing deadline is generally 30 days from discovery of the violation under best practices; after 30 days, you may lose rights under some interpretations, though the 6-year contract statute of limitations may still apply. Filing with the state is free and does not require an attorney.

Step 4: Expect the investigation process. The Indiana Department of Labor will contact your employer and request wage records, commission agreements, and payroll documentation. You may be asked to provide additional detail or clarification. The agency typically completes investigations within 30-60 days but can take longer if documents are complex. During this time, maintain communication with the investigator and provide any follow-up documentation promptly. The employer will be asked to respond to your allegations. If the Department of Labor finds a violation, it will order the employer to pay back wages, interest (typically 10% per year under Indiana Code § 34-13-2-1 or as applicable), and potentially penalties.

Step 5: Consult an employment attorney if the wage claim is denied, the amount is substantial (over $5,000), or your employer retaliates against you after filing. An employment attorney can file a civil lawsuit under Indiana Code § 22-2-9 for unpaid wages and may recover attorney fees if you win. Contact the Indiana State Bar Association Lawyer Referral Service (317-639-9241) or search for employment law attorneys at www.in.gov/judiciary. Many employment attorneys offer free initial consultations. If retaliation occurs (termination, reduced hours, or discipline after filing), you may have additional claims under Indiana whistleblower law or federal law, which an attorney can evaluate.