New Rule Allows Overtime Exemption for More Workers Paid on Commission

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The U.S. Department of Labor (DOL) has announced a new rule that potentially could allow more employers to take advantage of the overtime exemption allowed for certain employees who are paid on commission.

The DOL’s Wage and Hour Division (WHD) announced the new rule on May 18, calling it a way to provide greater simplicity and flexibility to retail industry employers.

The Fair Labor Standards Act (FLSA) allows employers in retail and service industries to exempt from overtime certain employees who are paid primarily on commission. The new rule—by withdrawing two provisions from the WHD regulations—opens that exemption for more employers.

One of the withdrawn provisions listed industries the DOL previously viewed as having “no retail concept,” which made them ineligible to claim the exemption. The other withdrawn provision listed industries that, in the DOL’s view, “may be recognized as retail” and were potentially eligible for the exemption.

By withdrawing those two lists, establishments in industries that had been on the nonretail 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’s announcement says.

Impact on Employers

Devra Hake, an attorney with Holland & Hart LLP in Denver, Colorado, says the change allows businesses in industries that were categorically excluded from claiming the exemption to now assert they have a “retail concept” and are therefore eligible to take advantage of the exemption. Some of those industries include dry cleaners, tax preparers, laundries, travel agencies, and roofing companies. Hake says the change means all employers’ statements that they have a retail concept will now be evaluated consistently.

Hake says she expects the change to mean more employers will begin paying more employees on commission. “The change means that more employees will be eligible for the exemption, and the exemption gives both employees and employers added flexibility,” she says. “I expect to see more employers take advantage of that flexibility and pay their employees on commission.”

Tareen Zafrullah, an attorney with Faegre Drinker Biddle & Reath LLP in Indianapolis, Indiana, says under the new rule, whether an employer is a retail or service establishment will depend on the regulations that remain now that the two provisions have been withdrawn. If an employer satisfies the remaining regulations, it will constitute a retail or service establishment regardless of whether it was listed in the withdrawn provisions, which were 29 CFR 779.317 and 29 CFR 779.320. Continue reading here…

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Source: HR Daily Advisor