I have handled a number of cases involving Section 7(i) of the Fair Labor Standards Act (“FLSA”) which provides an exemption from overtime for commissioned employees working for a so-called retail/service establishment. One of the major hurdles for an employer in claiming the exemption is the necessity to prove that the employer is in a “retail” industry or business. In this regard, the US Department of Labor (USDOL) had published, as part of the regulations, a ”partial list of establishments” that it deemed as not being retail and another “partial list of establishments” that “may be recognized as retail.” To say the least, these regulations provided little guidance and were badly outdated. Well, this has now been fixed as the agency has removed these lists from the regulations and announced that all establishments will be judged under the same standards, which will allow for a totally new construct (over time) as to the meaning of “retail” for this exemption. The agency noted that the deletion of these lists will also reduce confusion, as the regulation specifying businesses that “may be recognized as retail” did not impact the analysis as to whether a certain business was/was not a retail business.
The Department has held that businesses must have a “retail concept.” 29 CFR 779.316. A retail business usually “sells goods or services to the general public,” “serves the everyday needs of the community” and “is at the very end of the stream of distribution,” disposes its products and skills “in small quantities,” and “does not take part in the manufacturing process.” 29 CFR 779.316; 29 CFR 779.318(a).
The first deleted section, 29 CFR 779.317, was the non-retail list. This list included businesses such as dry cleaners, tax preparers, laundries, roofing companies, travel agencies, blue printing and photostating establishments, stamp and coupon redemption stores, and telegraph companies. The problem was that there was (with few exceptions) no reasoning or explanation given as why these businesses lacked a retail concept.
The DOL also announced in 1961 a list of almost eighty types of businesses that might be considered retail and amended that list in 1971 to remove “valet shops” from the list, but with little or no reasoning behind that decision. This “may be” list included businesses such as coal yards, fur repair and storage shops, household refrigerator service and repair shops, masseur establishments, piano tuning establishments, reducing establishments, scalp-treatment establishments, and taxidermists. Tellingly, the agency gave no reasoning for the inclusion of these businesses on the “good” list.
The Takeaway
I have struggled for years with these illustrative lists as I did not want to advise clients in a manner that was contrary to these “good” and “bad” lists, as I knew the power and influence that these regulations (actually, any FLSA regulation) have on federal courts. The lists almost negated the need or ability to engage in an analysis of the “retail” issue on its own merits. This revision simplifies the issue, makes it “easier” for a practitioner to advise employers on this crucial issue and takes this set of regulations into the modern day world.
A good result all around…
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