Federal Court In Illinois Rules Online Retailer Of Event Tickets Qualifies As “Retail Establishment” Under Section 207(i) Of The FLSA, Refusing to Defer to DOL Regulations
An online ticket broker that sells tickets to concerts, sporting events, and the theater qualifies as a “retail or service establishment” under Section 207(i) of the Fair Labor Standards Act (“FLSA”), Judge John Lee of the United States District Court for the Northern District of Illinois held. Blahnik v. Box Office Ticket Sales, LLC, 2017 U.S. Dist. LEXIS 45158 (N.D. Ill. Mar. 28, 2017).
Plaintiffs were sales representatives employed by Box Office Ticket Sales, LLC (“BOTS”) who alleged they were denied overtime pay. BOTS and the other defendants argued that the plaintiffs were not entitled to additional overtime wages under the FLSA since they qualified as commissioned employees of retail or service establishment under 29 U.S.C. § 207(i) of the FLSA. For Section 207(i) to apply, three requirements must be met: (1) the employee must be employed by “a retail or service establishment;” (2) the employee’s regular rate of pay must exceed one and one half times the minimum wage; and (3) more than half of the employee’s compensation must come from commissions on goods or services sold. 29 U.S.C. § 207(i). The only requirement at issue in Blahnik was the first requirement.
The court granted BOTS motion for summary judgment and held it qualified as a “retail or service establishment,” and in so doing, expressly addressed and rejected a regulation issued by the United Stated Department of Labor (“DOL”). The DOL regulation purportedly identifies establishments lacking a retail concept, 29 C.F.R. § 778.317, and lists travel agencies as one of the establishments lacking a retail concept. Plaintiffs had argued that because BOTS was akin to a travel agency, the regulation precluded application of Section 207(i) to BOTS. But Judge Lee rejected the plaintiff’s reliance on the DOL regulation, noting that the Seventh Circuit Court of Appeals had previously found the list in the regulation to be “an incomplete, arbitrary, and essentially mindless catalog.” Other courts have also ignored the list, finding it arbitrary.
The court found BOTS acted as a retailer in selling tickets to customers (not a wholesaler) and thus qualified as a retail establishment notwithstanding the list of establishments in the DOL regulation.
This decision highlights that § 207(i) can apply to online retailers—a method of selling that did not exist when 7(i) was enacted. It remains important, as always, to confirm compliance with state law before implementing any wage-and-hour practice, whether relating to commission salespersons or otherwise.