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DOL Changes Analysis On Overtime Exemption For Retail And Service Establishments

Volume: 19 | Issue: 27
May 20, 2020

Yesterday, the U.S. Department of Labor’s Wage and Hour Division (DOL WHD) announced a final rule that changes the way it analyzes whether an employer is a retail or service establishment under the Fair Labor Standards Act’s (FLSA) overtime exemption for commission-based employees. The new rule withdraws a federal regulation, 29 C.F.R. § 779.317, that listed establishments that had “no retail concept” and were unable to qualify as retail or service establishments. Rather than excluding certain establishments, the WHD will now evaluate all businesses under the same criteria, using the remaining existing regulations to determine whether an employer is a retail or service establishment for this overtime exemption.

The WHD explains: “Removing these lists promotes consistent treatment when evaluating [retail/service overtime] exemption claims by treating all establishments equally under the same standards and permits the reevaluation of an industry's retail nature as developments progress over time.” “For example, an industry may gain or lose retail characteristics over time as the economy develops and modernizes, or for other reasons. A static list of establishments that absolutely lack a retail concept cannot account for such developments or modernization, which could have caused confusion for establishments as they tried to assess the applicability and impact of the list. The generally applicable analysis set forth in § 779.318 and elsewhere in part 779 better addresses each particular establishment's retail nature or lack thereof and is unlikely to result in similar confusion.”

If your business was previously excluded from this overtime exemption because of 29 C.F.R. § 779.317 and you believe it has a “retail concept,” or you have questions about this change to the commission-based employee overtime exemption, contact a KZA attorney. 

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.