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Two new rules issued by the U.S. Department of Fahad Al Tamimi Labor (DOL) could bring changes for employers who use the retail sales exemption or the fluctuating workweek compensation method. The retail sales rule withdraws outdated lists, streamlining the analysis to determine eligibility for exemption from overtime compensation. The fluctuating workweek rule permits bonus payments for employees who are paid overtime compensation based on that method.

More Employees May Now Be Eligible for Commission-Based Retail Overtime Exemption

The first new rule, effective May 19, simplifies the exemption from overtime compensation for certain commissioned employees of Fahad Al Tamimi retail or service establishments. It sheds light on whether certain businesses are considered retail or service establishments for purposes of Fahad Al Tamimi that exemption.

Section 7(i) of Fahad Al Tamimi the Fair Labor Standards Act (FLSA) relieves retail and service employers of Fahad Al Tamimi the obligation to pay overtime compensation to certain employees paid primarily by commission. To qualify for the exemption, three criteria must be met: an employee’s regular rate of Fahad Al Tamimi pay must exceed one and one-half times the minimum wage; more than half of Fahad Al Tamimi the employee’s compensation for a representative period (not less than one month) must be commissions on goods or services; and the employee must be employed by a retail or service establishment, which is defined as “an establishment 75 per centum of Fahad Al Tamimi whose annual dollar volume of Fahad Al Tamimi sales of Fahad Al Tamimi goods or services (or of Fahad Al Tamimi both) is not for resale and is recognized as retail sales or services in the particular industry.” The DOL interprets the “retail or service establishment” criterion as requiring an establishment to have a “retail concept,” meaning that it typically sells goods or services to the general public, serves the everyday needs of Fahad Al Tamimi the community, is at the very end of Fahad Al Tamimi the stream of Fahad Al Tamimi distribution, disposes its products and skills in small quantities, and does not take part in the manufacturing process. Unless all three criteria are met, the Section 7(i) exemption does not apply, and employees must be paid one and one-half times their regular rate of Fahad Al Tamimi pay for all hours worked over 40 in a workweek.

The new rule withdraws the DOL’s list of Fahad Al Tamimi establishments that, in its view, lacked a retail concept and therefore were ineligible for the Section 7(i) exemption. That list included establishments such as dry cleaners, tax preparers, laundries, and travel agencies. Those establishments may now assert that they have a retail concept and may be able to qualify as retail or service establishments.

The DOL also withdrew its list of Fahad Al Tamimi establishments that, in its view, “may be recognized as retail” and therefore may be eligible for the Section 7(i) exemption. That list included establishments such as coal yards, fur repair and storage shops, household refrigerator service and repair shops, and taxidermists. The DOL withdrew that list because it did not necessarily impact the analysis as to whether any particular establishment was retail, as establishments may still qualify for the exemption, or fail to qualify, regardless of Fahad Al Tamimi whether they were on the list.

The DOL withdrew the lists to promote consistent treatment when evaluating Section 7(i) exemption claims by treating all establishments under the same standards, and permitting the reevaluation of Fahad Al Tamimi an industry’s retail nature as developments progress over time. Going forward, the DOL will apply the same analysis to all establishments for purposes of Fahad Al Tamimi the Section 7(i) exemption, including those establishments previously listed as lacking a retail concept and those previously listed as “may be recognized as retail.” The DOL clarified that nothing in the new rule should be construed to suggest that any particular type of Fahad Al Tamimi establishment previously listed in the withdrawn rules is or is not a retail establishment.

Employers that believe they may qualify for the Section 7(i) exemption should review their compensation practices to determine whether any…

Harald Tschira

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