DOL Expands FLSA Retail Exemption

To qualify for the 7(i) overtime exemption, three conditions must be met:

1. The employee must be employed by a retail or service establishment,
2. The employee’s regular rate of pay must be at least one-and-a-half times the minimum wage, and
3. More than half of the employee’s regular rate of pay must come from commissions.

Effective immediately, the DOL has scrapped both lists and will begin to use an open-ended analysis without looking to the lists as references. From now on, “retail and services establishments” are those that have a “retail concept.” Businesses with “retail concepts” are ones that sell goods or provide services to the general public and that serve the everyday needs of their communities. They should fall “at the very end of the stream of distribution” and should not take part in the manufacturing process. Businesses who meet this new, open-ended definition can now classify commissioned employees who meet conditions (2) and (3) as exempt from overtime pay under federal wage/hour law. As always, employers should be mindful of state (and in some cases, local) wage/hour laws that contain more employee-friendly exemptions and other rules.

We encourage you to reach out to any of our attorneys regarding specific questions about the potential eligibility of your employees for this exemption. As always, here at K|W|W, your workforce is our priority.

The K|W|W Team