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  1. #1

    Question Commissions Being Paid As Wage and Mileage Reimbursement

    My question involves employment and labor law for the state of: Michigan. Sorry if my post is a bit long.

    PART 1: I am a delivery driver ("at will" employee) for a courier company. I am strictly commission based, earning 43% of the revenues from every job I complete. I am required to track my business miles and turn in a report at the end of each week. I use my own vehicle on the job. I also have to report my hours worked on that same form.

    When I receive my pay checks, the gross amount is the total of my commissions earned. However, the company converts that amount to wages and mileage reimbursement. For example, I recently earned $677.38 in one week. I reported 40 hours worked and 1381 business miles. This is how my pay breaks down on my pay stub:

    $296.00 Commission
    $381.38 Reimbursement
    $70.46 Total Deductions
    $606.92 Net Pay

    A few side notes to add: 1) I receive weekly commission reports listing the jobs I did, what the customers were charged, and the pay I earned per job. 2) The adult minimum wage in Michigan is $7.40/hour. 3) Regardless of how many hours I report, the "commission" on my check is $296.00 (40hrs @ $7.40/hr). 4) I do realize mileage reimbursement is not required by law in Michigan.

    The company states they do it this way as "a favor" to me and its to my advantage. It certainly doesn't look like they're doing me any favors. 1381 business miles @ the standard mileage rate works out to $759.55. In the example above, I have $378.17 worth of mileage that I can write off, but only $28.15 of Federal taxes paid into the system because only $296.00 was reported to the IRS as taxable income.

    Is this on the up and up? Can an employee's gross pay be determined by commissions earned and then paid to her as wages/expense reimbursement?


    PART 2: In addition to being my boss at the company above (Company A), my boss owns his own courier company (Company B). The companies are separate business entities, each having its own federal and state ID numbers, customer database, employees, etc. Though they use the same PEO for payroll, etc.

    Company B is basically a customer of Company A. The jobs are dispatched to the drivers just like any others customer's jobs. However, any jobs that I complete on behalf of Company B do not show up on my commission report from Company A. Nor does Company A pay me for those jobs. Instead, I receive a second pay check Company B.

    What really bugs me is that I never applied for employment with Company B. I never completed any paperwork for Company B either. Yet, I have two different employee numbers with the PEO. And I receive a W-2 from each company at the beginning of the year.

    Nobody really understood the two pay check thing. And neither company will explain it. But can a company just add someone to its payroll like that?

  2. #2
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    Default Re: Commissions Being Paid As Wage and Mileage Reimbursement

    Part 1: They're either paying you what they owe, or they're not. If they are, whether they break it down into "minimum wage" in order to facilitate their own record-keeping and to ensure that they're not violating minimum wage laws, seems mostly academic from your standpoint - you're still getting paid the money that's due to you.

    If you negotiated a lower mileage reimbursement rate than "the standard rate", that was your choice. You are free to try to try to negotiate a higher rate.

    Oh, wait, I think I see what you're getting at. Your compensation agreement is as if you're a 1099 independent contractor (flat commission per job) and they're paying you as if you're a full-time employee while treating part of your compensation as a mileage reimbursement. You aren't actually owed a mileage reimbursement - just the commission. If that's what's happening then yes, what you're describing would appear to be a form of tax fraud.

    Part 2: I can't analyze the interplay between the two businesses, or whether or not they need additional paperwork - I don't have that information. But if you're being paid as agreed, what's your beef? (Or is it the same one - you're getting what you agreed, but they're apparently committing tax fraud.)

    If you wish to have your employer investigated for any irregularities in its tax records, you're free to notify the IRS or Michigan Department of Revenue.

  3. #3

    Default Re: Commissions Being Paid As Wage and Mileage Reimbursement

    Thank you, Mr. Knowitall, for your response.

    Quote Quoting Mr. Knowitall
    View Post
    Part 1: Oh, wait, I think I see what you're getting at. Your compensation agreement is as if you're a 1099 independent contractor (flat commission per job) and they're paying you as if you're a full-time employee while treating part of your compensation as a mileage reimbursement. You aren't actually owed a mileage reimbursement - just the commission. If that's what's happening then yes, what you're describing would appear to be a form of tax fraud.
    Yes, my compensation agreement is a flat commission per job. And again, I am a W-2 employee, not 1099 I.C. As for mileage reimbursement that's correct, I am not entitled by law to receive anything. Yet, beginning with their want ads and continuing all the way through the training, the employee is told s/he will receive commission plus mileage reimbursement. The reality is what I described in the OP and the employee doesn't know it until they get their first "commission check." There's nothing in writing from the company to support this other than their hire ads.

    It just seems odd that commissions which are fully taxable will determine the gross pay check, but wages and mileage reimbursement are what they record, report, and pay.

    Quote Quoting Mr. Knowitall
    View Post
    Part 2: I can't analyze the interplay between the two businesses, or whether or not they need additional paperwork - I don't have that information. But if you're being paid as agreed, what's your beef? (Or is it the same one - you're getting what you agreed, but they're apparently committing tax fraud.)
    Yes, its a case of getting what was agreed, but there's apparent tax fraud.

    To maybe clarify a bit Company B is owned by an employee of Company A, nothing more. Company A is privately owned by one individual. Company B is privately owned by another individual. Neither company or owner has ownership stake in the other. Its like Ford and GM. Two companies competing in the same industry. Although Companies A and B really don't complete. One handles "on demand" work, the other does routed work. Subcontracting work is very common in this industry. And that's what Company B does. It subcontracts work to Company A and Company A in turn assigns the work to its employees.

    My coworkers and I think Company A, our employer, should be able to explain why we would ever receive pay checks from Company B, a customer. We do not track mileage/hours for work that Company B subcontracts to Company A. Our mileage/hours are tracked from clock in to clock out and turned into Company A. Sometimes those pay checks from Company B show straight commissions being fully taxed. Other times, the gross is broken down into wages and mileage.

    Riddle me this...say you are in sales and work for ABC Sales Company. John Doe is a customer you call on regularly. One day pay day comes around and you receive two pay checks instead of one. The first was cut by ABC Sales. The second was cut by John Doe because your employer, ABC Sales, gave him your personal information, SSN, tax info, etc. without your knowledge or consent. That wouldn't bother you in the least?

    Point being and maybe not literally, but Company A handed over its personnel files to Company B. Or the owner of Company B having access to those files took it upon himself to use them as he saw fit. Just because the owner of Company B is an employee of Company A doesn't make it okay.

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