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DOL Streamlines Its Regulation Interpreting Commission Sales Exemption from Overtime

By Elizabeth Torphy-Donzella & Eric Hemmendinger - Shawe Rosenthal LLP

May 19, 2020

Apparently inspired by the tidying up trend, the Department of Labor threw out two sections of its interpretation concerning the commission sales exemption from overtime that no longer gave it joy.  The commission sales exemption covers sales employees who are primarily paid by commission.  To come under the exemption, the employee must be employed in a “retail or service” establishment, must earn at least 1.5 times the minimum wage, and more than half the employee’s compensation for a representative period (not less than one month) must represent commissions.

In 1961, the DOL amended the interpretation to include a long list of businesses it considered as lacking “retail concept” and another long list of businesses that may or may not be retail.  The “non-retail” list included, for example, dry cleaners, tax preparers, laundries, roofing companies, travel agencies, blue printing and photostating establishments, stamp and coupon redemption stores, and telegraph companies, The “may be” retail list included establishment in industries 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. These lists were not binding on courts, one of which described them as “mindless.”

The Department of Labor has now amended the interpretation to get rid of the lists, In explaining this change, the DOL observed, “an industry may gain or lose retail characteristics over time as the economy develops and modernizes, or for other reasons. A static list of establishments that absolutely lack a retail concept cannot account for such developments or modernization, which could have caused confusion for establishments as they tried to assess the applicability and impact of the list.”  The DOL will continue to apply this test: “Typically a retail or service establishment is one which sells goods or services to the general public. It serves the everyday needs of the community in which it is located.”  29 CFR 779.318.

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