DOL Unshackles Overtime Exemption For “Retail or Service Establishments”

Section 207(i) of the Fair Labor Standards Act provides a limited overtime pay exemption to relieve employers in ‘”retail or service establishments” from the obligation of paying overtime compensation to certain employees paid primarily on the basis of commissions.

The U.S. Department of Labor (“DOL”) has interpreted “retail or service establishment” as requiring the establishment have a “retail concept.” 29 C.F.R. 779.316.  Such an establishment typically “sells goods or services to the general public”, “serves the everyday needs of the community”,  disposes its products and skills “in small quantities”, and “does not take part in the manufacturing process.” 29 C.F.R. 779.318(a).

The DOL also previously had a lengthy but non-exhaustive list of 134 types of establishments described as lacking the “retail concept.” The list included travel agencies, tax services,  and dry cleaners. The DOL also had a lengthy but non-exhaustive list of 77 types of establishment that “may be recognized as retail.”

Effective May 19, 2020, the DOL has deleted these lists from its regulations. 8 FR 29867  In eliminating lists, the DOL explained some courts had questioned whether the lists had any rational basis.

The upshot of the agency’s action is that an establishment who had previously been on the non-retail list may now assert it has a retail concept. As long as the establishment meets the DOL requirements, it may qualify for the exemption.

Robert G. Chadwick, Jr. frequently speaks to non-profit organizations regarding labor & employment issues. To contact him for a speaking engagement please e-mail him at rchadwick@realclearcounsel.com.

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