Gross commissions earned being paid as minimum wage and expense reimbursement. Is this legal?

I am a delivery driver in the state of MI. I am an “at will” employee. I use my own vehicle on the job and must report my business miles each week. My earnings are strictly commission based, earning x-amount of dollars, which varies for each job I complete. When I receive my paycheck the commissions I earned are paid as wages plus expense reimbursement. Example: If my commissions = $1000.00, my paycheck = $296.00 taxable income (40 hours @ $7.40/hour) + $804.00 expense reimbursement. Can my employer legally do this? Seems fraudulent (e.g. unemployment insurance tax evasion).

Asked on June 10, 2009 under Employment Labor Law, Michigan

Answers:

GW, Member, Michigan and Hawaii Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

I'm not sure I understand what's going on, but if your employer is paying you earned commission and disguising it as mileage reimbursement, that's not ok. Not only is your employer falsely reporting your wages for unemployment purposes, but it is also not reporting your income to the IRS and Michigan taxing authorities. Your employer should only be reimbursing you at the IRS mileage reimbursement rate for miles actually driven. If the $804 "reimbursement" was for 1461 miles, then that amount is correct. If it is for less than that, or really represents commission, it's not ok.


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