Do you owe overtime to flat-rate and commissioned techs?

No — not by pay method alone.

The FLSA measures overtime by hours worked in a workweek, not by how the paycheck is calculated, so a tech paid by the job and a tech paid by the clock stand on the same overtime footing.

There is no "paid on flat rate, so no overtime" box to tick.

Flat-rate (per-job) pay does not remove the overtime duty.

For job-rate and day-rate workers, the regular rate is total job pay divided by hours actually worked, plus an extra half-time for each hour over 40 in a workweek.

The claim that flat-rate techs aren't owed overtime is false unless a specific exemption applies — and the exemptions are specific indeed, not a function of the pay plan.

Piece-rate techs — paid per install or per unit — follow the same method: all piece earnings plus other pay for the week, divided by all hours worked, with an extra half-time owed for each hour over 40.

Commissions are no different in principle: commissions count as pay for hours worked and must be included in the regular rate for overtime, whether or not they are the tech's only pay.

So the real compliance questions for a contractor are not whether variable-paid techs get overtime but how the rate is computed (below), and whether one narrow exemption — section 7(i) — actually fits your shop.

Whether flat rate, commission or a hybrid is the right design for your trucks is a separate question; that comparison lives in our tech pay-plan guide.

Section 7(i) is the one FLSA exemption built around commission pay, and every one of its tests has to hold at once.

It covers commissioned employees of a "retail or service establishment" only when their regular rate is more than 1.5 times the minimum wage and more than half their pay over a representative period (at least one month) is commissions.

Fail any one test and the exemption is gone.

The establishment test comes first, and it is not about whether the public would call you a retailer.

A retail or service establishment is one where 75% of annual dollar sales of goods or services is not for resale and which is recognized as retail in that particular industry.

Whether your shop's sales meet that 75% not-for-resale share, and whether your business is recognized as retail in the industry, are questions your actual books and your employment attorney have to answer — shops also sell equipment and parts, and the mix matters.

HVAC's own history here is unsettled.

Until 2020, a Department of Labor regulation — 29 CFR 779.317 — listed businesses said to lack a "retail concept," and courts had read that list as specifically carving air-conditioning contractors out of the 7(i) exemption.

In May 2020 the Department of Labor withdrew the list.

Whether an HVAC or plumbing service company can use 7(i) now is decided case by case.

Read that last paragraph again before you rely on the exemption.

The withdrawal removed a regulation that hurt HVAC shops; it did not create an exemption for them.

The 7(i) tests still stand, outcomes vary, and no blanket statement — including "commissioned HVAC techs are overtime-exempt" — is safe.

Treat 7(i) as a question for your employment attorney, argued from your actual pay mix, your establishment's sales pattern and the case law in your circuit — not as a line in the pay-plan handbook.

Every calculation in this section is one formula wearing different hats: the regular rate is all pay for the workweek divided by all hours worked that week, and each hour over 40 earns the pay already received plus an extra half of the regular rate.

The variations below are just what "all pay" pulls in.

Flat-rate and piece-rate pay.

Total job pay (or piece earnings) plus any other pay for the week, divided by hours actually worked.

The Department of Labor's own regulation works a piece-rate example: $523 for 50 hours is a $10.46 regular rate, and because straight time is already covered, the 10 overtime hours add $52.30 — not a new straight-time payment, just the extra half.

Weekly commissions.

Add the week's commission to the week's other earnings, divide by total hours, and each overtime hour earns an extra half of that combined rate.

A tech who earns hourly pay plus a commission on service tickets gets one calculation on the sum, not two calculations kept apart.

Bonuses and spiffs — usually in, and the label doesn't decide.

Bonuses count in the overtime regular rate unless they fit one of the FLSA's listed exclusions, such as truly discretionary bonuses or gifts on special occasions.

"Discretionary" is a tight doorway: the employer must decide both whether to pay and how much at or near the end of the period, with no prior promise.

A spiff schedule announced in advance — a set reward per maintenance agreement sold, say — is a promised, non-discretionary bonus, and production, quality, attendance and "work faster or stay with us" bonuses are all in the regular rate for the same reason.

Calling a payment a discretionary bonus doesn't make it one; the facts, not the label, decide.

The regulation's own bonus example shows how much this moves a paycheck: $12 an hour for 46 hours plus a $46 production bonus gives a $13 regular rate, so overtime is owed at $19.50 — not the $18 you'd pay if the bonus never entered the math.

Commissions and bonuses paid later.

When a commission or bonus is paid monthly or later, you can pay overtime on the hourly rate first — but once the amount is known, it must be apportioned back over the weeks it was earned, and extra overtime paid for each of those weeks that had overtime hours.

A bonus covering several weeks, such as a quarterly install bonus, may be left out of the overtime math until it's known, on the same true-up terms.

Where a monthly commission can't be tied to specific weeks, the regulation's allocation method multiplies it by 12 and divides by 52.

The payroll consequence is the point: a variable-pay plan needs a true-up process, not just a payout date.

Everything above is federal law.

State overtime rules are a separate layer — and this page's research did not confirm them, for California or any other state.

That includes California's daily-overtime rules and its requirements around written commission agreements: our sources establish the federal duties, not the state ones.

What the federal facts do tell a California shop: the regular-rate method above applies to your flat-rate and commission techs wherever the trucks roll, because it is federal law.

What California adds on top — daily thresholds, any commission-contract paperwork, any different rate for different hours — has to be confirmed before you rely on the federal weekly test alone.

Do not treat this page as a complete answer for a California workforce.

Confirm the state layer with the state agency that enforces wage law in California, and with your employment attorney.

The same caution applies in every state you run techs in: the federal math is the part this page can verify; the state math is the part only the state can answer.

The direct cost is the unpaid half-time itself, and the regulation's piece-rate example shows how it scales.

Fifty-two dollars and thirty cents is one tech's shortfall for one week at a $10.46 regular rate — trivial on its own.

But the same shortfall repeats for every overtime week, for every tech paid under the plan, and a shop-wide "flat rate = no overtime" policy is a policy of unpaid wages in every one of those weeks unless a specific exemption applies.

The deferred-commission trap costs more because it hides longer.

A quarter of commissions or install bonuses paid without the apportioned-back true-up is a quarter of uncomputed overtime — owed for every prior week that had overtime hours, across the whole crew, discovered only when someone runs the math retroactively.

And spiff plans announced without anyone running their regular-rate math bake the error in from week one, because an announced spiff is in the rate from the first week it can be earned.

The assumption risk is the cheapest to fix: retire "we pay flat rate, so no overtime" and "our techs are commissioned, so 7(i) covers us" before either appears in payroll practice.

The first is false unless an exemption applies; the second has to survive all three 7(i) tests against your real pay mix — which is an attorney's question, not a handbook footnote.

What noncompliance costs in penalties or damages, this research did not confirm — our sources establish the calculation duties, not enforcement amounts, so no figure belongs here.

If you are correcting past pay periods, or unsure whether any exemption fits your shop, take your pay records to an employment attorney; the Department of Labor's Wage and Hour Division is the federal agency that enforces the FLSA.

Overtime is one compliance layer of many that come with a crew — the rest of running the hiring side, from licence verification to onboarding, is in our guide to hiring HVAC and plumbing techs.

This page is employer career and business information, not legal advice. Overtime treatment depends on your pay mix, your establishments and your state — confirm your plan with an employment attorney or the Department of Labor's Wage and Hour Division.