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Federal - DOL Issues Final Rule to Simplify Retail or Service Establishment Exemption

On May 18, 2020, the U.S. Department of Labor’s Wage and Hour Division (WHD) announced a final rule to clarify the Fair Labor Standards Act’s (FLSA) overtime exemption for primarily commission-based employees of retail or service employers (section 7(i) exemption). The clarification narrowed the analysis to determine when an employer is a retail or service establishment by withdrawing the following:

  • List of industries with “no retail concepts,” which made them ineligible to claim the section 7(i) exemption.
  • List of industries that “may be recognized as retail,” which made them potentially eligible for the exemption.

Withdrawing these lists promotes consistency when evaluating section 7(i) claims by treating all establishments equally under the same standards and permits the re-evaluation of an industry’s retail nature as it evolves. More specifically, by withdrawing these two lists:

  • Establishments in industries that had been on the nonretail list may now assert that they have a retail concept and, if they meet the existing definition of retail and other criteria, may now qualify for the exemption; and
  • Establishments in industries that were on the “may be” retail list may continue to assert they have a retail concept.

The WHD issued this rule without notice, without comment, and it took immediate effect.

Read the final rule and fact sheet