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

Under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 206 et seq., commission pay is a legal form of compensation that must satisfy the federal minimum wage of $7.25 per hour and overtime requirements under 29 U.S.C. § 207. The FLSA covers all employers with gross annual revenue of at least $500,000 or who are engaged in interstate commerce. Commission employees are entitled to overtime compensation (time-and-a-half) for hours worked over 40 per week, calculated on the basis of their regular rate of pay (which includes commissions).

The Department of Labor (DOL) enforces the FLSA and has issued guidance that commission pay must be included in calculating the regular rate for overtime purposes. The FLSA permits commission-based compensation structures but requires that the employee's total compensation—when divided by hours worked—must meet the minimum wage floor. Employees may file complaints with the Department of Labor's Wage and Hour Division, and the statute of limitations for wage claims is typically two years (three years for willful violations). Remedies include back wages, liquidated damages equal to the unpaid wages, and potentially attorney's fees.

Michigan's Payment of Wages Law (MCL 408.475 et seq.) provides protections for commission employees that are comparable to and sometimes stronger than federal law. Under MCL 408.475, "wages" are defined to include all compensation for labor, expressly including bonuses and commissions that have been earned by the employee. This means that once a commission is earned—whether upon signing a contract, making a sale, or achieving a specific condition—it becomes a wage that must be paid.

Michigan's minimum wage, currently set at $10.33 per hour (adjusted annually for inflation under MCL 408.394), applies to all employees including those earning commissions. If a commission-based employee's total earnings divided by hours worked fall below the state minimum wage, the employer must make up the difference. This is a stricter requirement than the federal minimum wage of $7.25, providing greater protection to Michigan workers.

MCL 408.476 requires that all wages, including commissions, be paid on established regular paydays—typically at least semi-monthly. Employers cannot delay payment of earned commissions beyond the regular pay schedule. Additionally, MCL 408.478 prohibits deductions from wages except those required by law (taxes, garnishments) or authorized in writing by the employee.

Michigan covers all employers, including very small businesses; there is no employer size threshold for the Payment of Wages Law. This means even a single-person enterprise must comply. The law applies to all employees classified as employees under Michigan law, and independent contractors generally fall outside its protection.

Under MCL 408.481, employees may file a wage claim with the Michigan Department of Labor within two years of the violation (or three years if the employer willfully violated the law). The Department can investigate, order restitution, and assess penalties. Employees may also sue in civil court for unpaid wages and recover damages, and prevailing employees can recover attorney's fees under MCL 408.484.

Michigan law recognizes several important exceptions and limitations to commission protection. Independent contractors are not covered by the Payment of Wages Law; however, misclassification as an independent contractor when the worker is actually an employee is a common violation. Courts and the Michigan Department of Labor apply the 'economic reality test' to determine true independent contractor status, focusing on control, investment, and independence.

Commission agreements that are truly voluntary and unilateral (the employer reserves the right to modify or cancel them unilaterally at any time) may be subject to challenge, though Michigan courts have held that even unilateral commission plans, once announced and acted upon, create enforceable obligations. However, an employer can typically modify or eliminate commission structures for future work with proper notice, but cannot retroactively reduce or eliminate commissions already earned.

Sales employees in certain industries may have different expectations. For example, in real estate, it is common for agents to be classified as independent contractors, but this does not exempt real estate brokers from wage law compliance for employees they actually control. Commissioned insurance agents face similar analysis.

The 'primary duty test' may apply in some contexts: if an employee's primary duty is not sales but management, administrative, or professional work, they may still be entitled to overtime even if partially compensated by commission. Additionally, if an employer makes unlawful deductions from commissions (beyond permitted wage assignments or legal withholdings), the entire deduction scheme may be invalidated.

Commissions tied to illegal activities or fraud are not protected—an employee cannot claim unpaid commission for sales obtained through fraud or violation of law. Similarly, clawback provisions that attempt to recover previously paid commissions for returned merchandise or cancelled contracts must be clearly stated in writing and applied consistently; excessive or unreasonable clawbacks may violate the wage law.

Step 1: Document Everything. Create a detailed record of all commission-earning activity: dates of sales, contracts signed, amounts earned, written commission agreements or offer letters, email confirmations, and any written communications about commissions. Keep screenshots of sales platforms or CRM systems if applicable. Save all paystubs and compare them to your commission calculations. Note the specific dates when commissions should have been paid under the agreed schedule. If no written agreement exists, document any oral statements from management about how commissions would be calculated and paid. Preserve all evidence in multiple formats (email, cloud storage, printed copies) to prevent loss.

Step 2: Attempt Internal Resolution. Before filing a formal claim, provide your employer with written notice (email is acceptable) of the unpaid commission amount, the dates involved, and a request for payment within a reasonable timeframe (typically 5-10 business days). Keep a copy of this communication. Request a meeting with your manager or HR department to discuss the discrepancy. Document the employer's response. This step is not legally required but demonstrates good faith and sometimes leads to quick resolution. If the employer refuses, offers excuses, or becomes hostile in response, this creates a record useful in any later claim or lawsuit.

Step 3: File a Wage Claim with the Michigan Department of Labor. Visit the Department of Labor's website at www.michigan.gov/leo (Labor & Economic Opportunity) and locate the Wage & Hour Division. File a wage complaint using their online form or by mail. Include: your name and contact information, employer name and address, dates of unpaid commissions, amounts owed, description of the commission agreement, and copies of supporting documentation (offer letters, paystubs, emails, sales records). There is no filing fee. The filing deadline is two years from the date each commission was earned (three years if the violation was willful). You can also call the Michigan Department of Labor at 517-373-8363 to request assistance or ask questions about the process.

Step 4: Understand the Investigation Process. Once filed, the Department of Labor assigns an investigator who will contact you for more details and may request additional documentation. The investigator will then contact the employer and request records: payroll data, commission agreements, sales records, and written policies. The employer has a limited time (usually 10-14 days) to respond. The investigator may conduct interviews with you, your employer, and any witnesses. This process typically takes 30-60 days but can extend longer if the employer disputes facts or if records are complex. You will be notified of the investigator's findings. If the Department determines the employer violated wage law, it can order the employer to pay you the unpaid commissions, applicable interest (typically 5% per year), and may assess penalties against the employer. You will receive written notice of the decision.

Step 5: Consult an Attorney If Needed. If the Department of Labor's investigation does not resolve the dispute, or if the amount owed is substantial (typically $2,500 or more), consult an employment attorney who specializes in wage claims. An attorney can file a civil lawsuit in Michigan state court (district or circuit court depending on amount) for unpaid wages, penalties, and attorney's fees under MCL 408.484. Attorney's fees are recoverable if you prevail, making contingency representation often available. An attorney can also advise whether filing a class action complaint is appropriate if multiple employees were denied commissions under the same scheme. Many employment attorneys offer free initial consultations.