DOL Issues Final Rule on Commission-Based Retail Employees and Overtime Exemptions
On May 18th, 2020, the Department of Labor (DOL) issued a final rule that is designed to provide greater flexibility to employers and employees in the retail/service industries. The updated regulation pertains to the treatment of certain commission-based retail employees under overtime rules of the Fair Labor Standards Act (FLSA). In this article, our West Palm Beach employment law attorneys explain three key things that employers and employees should know about the updated DOL rule.
What to Know About the New DOL Rule on Commission-Based Retail/Service Workers
- Some Retail and Service Employees Can Be Classified as Overtime Exempt
As a starting point, employers and employees should understand that some commission-based retail and service workers can be exempt from the FLSA’s overtime requirements. Generally speaking, the FLSA allows retail and service employees to be exempt if they are “primarily” paid through commissions while working in a retail/retail-service position.
- The Updated Rule Eliminates the Old Industry Classifications
Under the previous standard, the DOL used a pair of lists to determine which employers fit into specific industries. Essentially, the lists were used to determine if and when an employer could qualify as a ‘retail’ business for the purposes of this FLSA test. Based on their industry, some employers were not allowed to utilize this exemption.
Under the new rule, the DOL has simply eliminated the classifications. The agency will no longer use pre-set industry based lists to determine if a company is a retail/service employer for the purposes of this FLSA exemption.
Going forward, businesses will be permitted to “assert that they have a retail concept”, regardless of their industry. To be clear, an employer does not have the right to simply elect to classify their business as having a retail concept. It is a fact-based determination. That being said, employers will not be automatically excluded from making the claim based solely on their industry.
- Standards Remain the Same: 1.5x Minimum Wage and 50 Percent Commission
Beyond working in a position that has a ‘retail concept’, employees must also meet certain wage thresholds to qualify for this overtime exemption. Indeed, in order to qualify as an overtime exempt employee for the purposes of the Fair Labor Standards Act, a commission based retail/service worker must:
- Be paid at rate that is at least 1.5 greater than the applicable minimum wage; and
- Make at least 50 percent of their total compensation from commissions.
If an employee does not satisfy both of those metrics, then they cannot be classified as an overtime exempt worker. It does not matter the nature of the business. The updated DOL guidance does not change the basic compensation requirements.
Call Our South Florida Employment Lawyers Now
At Pike & Lustig, LLP, our Florida employment attorneys are experienced, solutions-focused advocates for clients. If you have questions about commission-based retail employment and overtime pay, we can help. For a confidential consultation with an experienced wage and hour attorney, please call us today. We represent employers and employees throughout South Florida, including West Palm Beach, Port St. Lucie, Fort Lauderdale, Boca Raton, and Miami.