The Department of Labor’s Revised Rules Allow More Employers To Assert Overtime Exemptions
By Aaron Chaet
On May 19, 2020, the U.S. Department of Labor’s Wage and Hour Division (“WHD”) issued a final ruleFN1 that withdrew the “partial list of establishments” it previously viewed as having “no retail concept,” which disqualified the employees of certain commissioned retail and service establishment from the Fair Labor Standard Act’s (“FLSA”) overtime exemption.FN2
The “partial list of establishments” that were previously excluded from eligibility for the FLSA’s retail or service exemptionFN3 included accounting firms, advertising agencies, ambulance service companies, dry cleaners, engineering firms, license and legal document service firms, sign painting shops, and travel agencies.FN4 As a result of the revision, previously excluded establishments will be evaluated like all other retail and service establishments under the criteria provided in 29 CFR § 779.318,FN5 which includes establishments that sell goods and services to the general public and “serve the everyday needs of the community in which [they are] located.”FN6
The WHD’s stated reason for the withdrawals was to promote consistent treatment when evaluating exemption claims under section 7(i) of the FLSA for certain retail and service employees. Without the lists of disqualifying and potentially qualifying establishments, the WHD will be able to evaluate all establishments in an equal manner. It also provides flexibility to the WHD to adapt to changes in the market by permitting “the reevaluation of an industry’s retail nature as developments progress over time.”FN7
Takeaway
Companies that were previously included in the “partial list of establishments” excluded from section 7(i) exemption may now have employees that qualify for the FLSA overtime exemption. Please contact the attorneys at Campbell Litigation, P.C. for guidance regarding the eligibility for FLSA overtime exemptions, particularly for those companies who were previously excluded.
Footnotes:
FN1: 29 CFR Part 779, see also 85 FR 29867 available at https://www.federalregister.gov/documents/2020/05/19/2020-10250/partial-lists-of-establishments-that-lack-or-may-have-a-retail-concept-under-the-fair-labor.
FN2: The FLSA provides that unless employees qualify for an overtime exemption they must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay. See 29 U.S.C. §§ 207, 213.
FN3: To qualify for the retail or service exemption, the following criteria must be met: (1) the employee must be employed by a retail or service establishment, (2) the employee’s regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked; and (3) more than half the employee’s total earnings in a representative period must consist of commissions. See 29 U.S.C. § 207(i).
FN4: 29 CFR § 779.317.
FN5: The WHD also withdrew the corresponding “partial list of establishments” that “may be recognized as retail.” See 29 CFR Part 779, see also 85 FR 29867 available at https://www.federalregister.gov/documents/2020/05/19/2020-10250/partial-lists-of-establishments-that-lack-or-may-have-a-retail-concept-under-the-fair-labor.
FN6: 29 CFR § 779.318(a).
FN7: 85 FR 29867 available at https://www.federalregister.gov/documents/2020/05/19/2020-10250/partial-lists-of-establishments-that-lack-or-may-have-a-retail-concept-under-the-fair-labor.