There has been a lot of action lately from the USDOL on the issue of the Section 7(i) exemption from overtime (29 USC 207(i), the so-called commission exemption.  One of the basic requirements for an employer trying to claim this exemption is that it must be in a “retail business.”  Until May 2020, this was a hard test because the agency had (for decades) included in the regulations governing Section 7(i) a listing of businesses that did not have a retail quality.  In May 2020, the agency rescinded those lists, opting to allow the analysis to be governed by the general criteria applicable to these issues.  Now, the agency has, essentially, followed its own new tenets and ruled in an Opinion Letter that employees of staffing firms may be eligible for the commission/retail exemption.

As Wage and Hour Administrator Cheryl Stanton noted, a “typical staffing firm,” meaning an entity that sends temporary workers to clients could, in fact, qualify as retail or service establishment.  The Administrator went through the three factor standards utilized in these issues and she concluded that staffing firms could be found to: 1) sell goods and services; 2) at least 75% of which could be “recognized by the industry as retail;” and, 3) these entities receive no more than 25% of their business from resale.

Ms. Stanton noted that the DOL had (in May 2020) rescinded the decades-old lists of businesses that might or might not qualify as retail.  She explained that the lists were rescinded after numerous courts wondered whether they continued to have usefulness.  However, the Administrator observed that whether a staffing firm was, in fact, a retail or service establishment was very dependent on the particular circumstances of that company’s operation.

The Takeaway

I welcome this holding and hope that the trend continues.  The longstanding definition of a “retail or service” business is outdated and not suited to a modern, high tech, society.  The listings had made courts prisoners of the agency’s view, from decades ago.  Now courts, and the agency, will be allowed to gauge the circumstances how a business operates against the designated statutory and regulatory criteria.

Keep up the good work!

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