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DOL Broadens Overtime Exemption Rule for Commissioned Retail and Service Workers

In an effort to provide clarity during an uncertain time, the United States Department of Labor (DOL) issued a final rule on Tuesday to simplify an overtime exemption for commission-based workers in retail and service industries. 

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The Fair Labor Standard Act (FLSA) overtime exemption permits certain retail and service establishments to avoid paying overtime to employees who are paid primarily on a commission basis. The DOL withdrew two previously published and long-established lists intended to help employers decide whether they meet the definition of a traditional retail establishment.

The first list identified industries that the department previously identified as not having a retail concept and were therefore not covered by the exemption. These businesses included accounting firms, real estate and construction companies. The second list identified industries that might be recognized as retail, which included auto repair shops, department stores and restaurants.

By withdrawing these two historical lists, establishments in industries that had previously been on the non-retail list may now assert they have a retail concept and — if they meet the existing definition of retail and other criteria — may now qualify for the exemption, the DOL said in its release.

“The DOL’s modernization of this overtime exemption is a positive step forward for today’s businesses," said Deirdre MacBeth, content director, regulatory, at WorldatWork. "Businesses have evolved over time and are no longer single-faceted — this new rule now provides an opportunity for multi-faceted businesses with retail characteristics to qualify for the exemption.”  

Moving forward, the DOL said it will apply the same analysis to all establishments to determine whether they have a retail concept and qualify as retail or service establishments, promoting greater simplicity and flexibility for employers and workers alike.

“This final rule unshackles job creators in the retail space who had previously been categorically excluded from the exemption without notice and comment,” said Cheryl Stanton, Wage and Hour Division Administrator. “Permitting all retail employers to potentially qualify for this exemption can increase flexibility for businesses and workers. Eliminating confusion empowers job creators to grow their businesses, comply with the law and provide even more good jobs for American workers.”

About the Author

Brett Christie Bio Image

Brett Christie is the managing editor of Workspan Daily.


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