Tampa Bay Employment Law Professionals
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DOL Expands Retail Exemption from Overtime Law

With no notice and no opportunity for public comment, the Department of Labor has withdrawn provisions from the DOL's Wage and Hour Division regulations which were originally designed to protect employee rights and provide clarity to employers. The regulations listed industries that the DOL previously viewed as having "no retail concept," which made them ineligible to claim an exemption from the overtime law, and those industries that, in the Department’s view, "may be recognized as retail,’ and were potentially eligible for the exemption” from the overtime law.

Here is the press release: https://www.dol.gov/newsroom/releases/whd/whd20200518

The Fair Labor Standards Act (FLSA) generally requires covered employers to pay nonexempt employees overtime compensation for time worked in excess of 40 hours per workweek. See 29 3 U.S.C. 207(a). Section 7(i) provided an exemption for employers in retail and service industries from having to pay overtime compensation to employees paid primarily on the basis of commissions.

In order for an employee to come within this exemption, “the regular rate of pay of such employee [must be] in excess of one and one-half times the [minimum wage],” and “more than half [of the employee’s] compensation for a representative period (not less than one month) [must represent] commissions on goods or services.” 29 U.S.C. 207(i). In addition, the employee must be employed by a retail or service establishment, which is “‘an establishment 75 per centum of whose annual dollar volume of sales of goods or services (or of both) is not for resale and is recognized as retail sales or services in the particular industry.’” 29 CFR 779.312

The DOL has interpreted “retail or service establishment” as requiring the establishment to have a “retail concept.” 29 CFR 779.316. Such an establishment typically “sells goods or services to the general public,” “serves the everyday needs of the community,” “is at the very end of the stream of distribution,” disposes its products and skills “in small quantities,” and “does not take part in the manufacturing process.” Id. at § 779.318(a).

For almost sixty years, the DOL had a regulation that included a list of examples of the types of business that were generally not retail establishments and those that might be recognized as retail. The DOL has, with no notice or opportunity for the public to comment, now eliminated these lists.

This decision will upset years of established labor law and will result in more businesses claiming that they do not need to pay their employees overtime for the hours worked in excess of forty in a workweek.  For example, one of the industries that was previously on the no retail list were roofers, but now some employers will likely to try claim that they are retail businesses.

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