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

Under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 206, all employees—including those paid by commission—must earn at least the federal minimum wage of $7.25 per hour for all hours worked. The FLSA defines 'hours worked' broadly to include time spent on job-related activities even if no commission is earned, such as customer service, training, or administrative tasks.

29 U.S.C. § 207 requires overtime pay (one and one-half times the regular rate) for all hours worked over 40 per week. For commissioned employees, the 'regular rate' is calculated by dividing total compensation earned in the workweek (including commissions) by total hours worked. This can result in a lower hourly rate and higher overtime obligations if commissions are substantial.

The FLSA permits employers to use a 'fluctuating workweek' method for salaried commissioned employees in limited circumstances, but this requires a clear agreement and must still result in at least minimum wage for all hours. Employers cannot make unlawful deductions from commission pay that reduce the employee below minimum wage. The EEOC and U.S. Department of Labor Wage and Hour Division enforce federal commission laws.

Texas does not have a state minimum wage above the federal $7.25/hour, so commissioned employees in Texas are subject to the federal minimum wage floor under federal FLSA rules. However, Texas Labor Code Chapter 65 imposes strict requirements on wage payment and deductions that provide additional protections beyond federal law.

Under Texas Labor Code section 61.014, employers cannot make deductions from an employee's wages—including commissions—that reduce the pay below the minimum wage for hours worked. This means commission advances, draws, chargebacks, or other deductions cannot be recovered from future commission earnings in a way that causes the employee to earn less than minimum wage for the hours they worked.

Texas Labor Code section 65.001 requires that all wages, including commissions, be paid no later than the next regular payday. Unlike some states with specific commission payment deadlines, Texas ties commission payment to the employer's established pay schedule. If the commission is earned in one pay period but not paid until a later period, the employer must have a clear written policy disclosing this timing.

Commissioned employees in Texas are covered by all wage and hour protections applicable to hourly employees, including overtime under the FLSA. Texas does not have special carve-outs or exemptions for commissioned workers from minimum wage or overtime laws. An employee's classification as commissioned does not exempt them from the 40-hour overtime threshold; overtime is calculated based on total hours worked in the workweek, regardless of how compensation is structured.

Texas also recognizes that commission earnings must be calculated fairly and cannot be withheld as a penalty for poor performance or business losses unrelated to the employee's work. Employers cannot implement 'clawback' policies that recoup commissions for customer returns or chargebacks unless the employee explicitly agreed to such terms in writing and the deduction does not reduce total pay below minimum wage for hours worked.

Texas law provides an exception for employees in the executive, administrative, or professional exemptions under the FLSA who are truly exempt from overtime. However, many commissioned employees do not qualify for these exemptions because they do not meet the duties tests or salary requirements, and commission-based compensation alone does not create an exemption.

Employers in Texas can legally impose commissions that fluctuate based on sales performance, customer acquisition, or other business metrics, provided the structure does not result in pay below minimum wage for hours worked. An employee earning $0 in commission in a slow week would still need to be paid minimum wage for all hours worked that week.

Unlawful deductions for business losses are a significant exception to commission payment obligations. For example, if a customer returns merchandise or a sale is reversed, the employer cannot deduct that amount from the employee's commission if it reduces their pay below minimum wage. However, if an employee is paid on a fluctuating workweek method (rare for commissioned employees but possible), the calculation must still guarantee minimum wage.

Independent contractors are not entitled to minimum wage or commission payment protections under Texas or federal law. The distinction between employee and contractor is determined by the degree of control the employer exercises. Many commission-based relationships are misclassified; if an individual is truly an employee, they receive minimum wage protections even if paid entirely by commission.

Texas recognizes at-will employment, meaning employers can change commission structures or terminate commissioned employees without cause, provided they pay all earned commissions by the next payday. However, changing a commission plan retroactively to withhold previously earned commissions is unlawful. Collective bargaining agreements or express written contracts may impose stricter commission payment terms.

Step 1: Document all commission agreements and earnings. Keep copies of the written commission plan or offer letter outlining how commissions are calculated, when they are paid, and what deductions (if any) apply. Maintain detailed records of sales, transactions, or other commission-triggering events, along with written confirmation of commission amounts owed each pay period. Save all pay stubs and any communications with management about commission disputes. Take screenshots of payroll records, spreadsheets, or systems showing commission calculations. Note the dates you performed work and any periods when commissions were withheld or deducted.

Step 2: Raise a formal internal complaint. Request a written meeting with your manager, HR department, or payroll to explain the discrepancy between promised commissions and what you received. Send a follow-up email summarizing the meeting and restating your concern (e.g., 'You agreed to pay me 10% commission on all sales; I completed $50,000 in sales but only received payment for $30,000'). Ask for a written explanation of any deductions or shortfalls. Provide the employer a reasonable deadline (10–14 days) to respond or correct the issue. Keep copies of all correspondence. This step establishes a record and may resolve the issue without litigation.

Step 3: File a wage claim with the Texas Workforce Commission (TWC) Wage and Hour Division. Visit the TWC website at www.twc.texas.gov and locate the Wage and Hour Division. You can file a wage claim online, by mail, or in person at a local TWC office. The claim must include your name, address, phone number, the employer's name and address, the date(s) commission was owed, the amount claimed, and a description of what happened (e.g., 'Employer withheld $5,000 in earned commissions in violation of Texas Labor Code section 61.014'). There is no filing fee. You must file within two years of the wage violation (or three years if the violation was willful). Include copies of your documentation (pay stubs, commission agreements, emails). The TWC will contact the employer and attempt to resolve the claim administratively.

Step 4: Participate in the TWC investigation process. After you file, the TWC Wage and Hour Division will notify the employer and request records (payroll, commission schedules, timesheets). The agency will investigate whether the employer withheld earned wages and whether deductions were lawful. You may be asked to provide additional documentation or participate in an interview. The investigation typically takes 30–90 days, though complex cases may take longer. If the TWC finds a violation, it will issue a determination requiring the employer to pay the owed commission plus interest. The employer has the right to appeal, and you may be asked to participate in an administrative hearing before a hearing officer.

Step 5: Consult an employment attorney if the TWC process does not resolve the issue or if you want to pursue additional remedies. Contact a Texas employment lawyer who specializes in wage and hour disputes. An attorney can file a civil lawsuit in state court for unpaid wages, which may include the unpaid commission, interest (typically at the judgment rate of 5% per annum), and potentially attorney's fees if you prevail. You may also have federal claims under the FLSA (29 U.S.C. § 215), which allows recovery of unpaid wages plus an equal amount in liquidated damages and attorney's fees. Do not wait; your two-year statute of limitations under state law (or three years for willful violations) and the FLSA's two-year statute of limitations (three years for willful violations) are running.