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Legal Considerations When Accepting A Draw

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Employers oftentimes enter into a payment relationship with sales agents to assist with cash flow problems.  Since a sales representative’s salary may be sporadic or unpredictable, the employer may set a bi-weekly or monthly income stream, known as a draw. While seemingly helpful for sales agents, employees should be weary of certain legal issues. If you are having a dispute with your employer about unpaid minimum wage, bonuses, commissions, overtime, draws, or any other wage problem contact employment attorney Karl S. Gwaltney at 919.526.0450 or through email at

There are various types of draws. Some sales agents are paid a permanent draw in which the money paid to the salesperson acts as a salary. The employer and employee negotiate commission percentages for sales made against the draw. In this commission and draw structure, there is no concern that the salesperson will have to pay back any amounts earned as a draw. This draw is the sales representative’s pay to keep no matter the circumstances.

Other draw arrangements may be more complex. A sales representative may be required to maintain a certain level of sales, which are then compared to the draw and if there is not enough sales, the sales representative may be required to pay the company back from future or past draws for any shortfall. Under this relationship, the draws are not guaranteed to sales personnel on a permanent basis and there is no expectation of payment of a continued draw if the sales person does not maintain the necessary sales levels.

Under the Fair Labor Standards Act and North Carolina Wage and Hour Act, an employer must pay employees minimum wage and overtime for hours worked in excess of 40 per week. However, there are many exceptions to this rule, including for any employee employed in a true executive, administrative, or professional capacity or in the capacity as an outside salesman.

Salary draws are oftentimes paid to “outside sales agents.” The outside sales exemption requires that an employee makes sales customarily and regularly away from an employer’s place of business. The outside sales exemption is applicable even if an employee is paid only on commissions. If an employee is a legitimate outside sales agent, there is no requirement that the employee be paid minimum wage and overtime compensation.

If an employee is an outside sales agent, an employee compensated with a repayable draw can end up paying more than they make. In a recent case, an employee sued a company for unpaid commissions but the company was able to establish that the sales person’s draw was subtracted from any commissions. When the employee’s monthly sales were below the sales goal, the employee became indebted to the company for deficiencies. When the sales person could not maintain her monthly sales quota, the company completely stopped paying any draw or other payments. The court found that the company did not owe the plaintiff for unpaid commissions because the draw was not a guaranteed salary but was instead a draw.

Even if an employee is paid only with a draw, if an employee is falsely labeled as exempt from minimum wage and overtime compensation, the attorneys at Maginnis Law, PLLC can help get the compensation to which you are entitled. When deciding whether to proceed with a claim for unpaid wages, bonuses, draws, or commissions, contact the unpaid wage and labor attorneys at Maginnis Law, PLLC. Determining whether you should be paid overtime, minimum wages, or whether you have to repay an employer draw may require detailed legal research. If you are wrongly denied pay from your employer, contact Raleigh unpaid wage and overtime lawyer Karl S. Gwaltney at 919.526.0450 for a free consultation regarding your rights. Maginnis Law, PLLC is a Raleigh firm handling employment cases dealing with unpaid wages and overtime throughout Wake County, Cary, Apex, Durham, Vance County, and Henderson. The firm takes certain wage and hour/overtime cases throughout North Carolina, particularly when groups of workers are involved. Contact the firm to discuss your overtime claim today or submit a confidential new case inquiry here.