October 23, 2019

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Latest Department of Labor Opinion Letter Addresses the FLSA’s Retail/Service Establishment Employee Exemption

The U.S. Department of Labor’s Wage and Hour Division (“WHD”) continues to issue guidance at a rapid pace, releasing a new opinion letter regarding the retail or service establishment overtime exemption under the Fair Labor Standards Act (“FLSA”).  The letter brings clarity to a recurring issue affecting retailers.

FLSA Section 7(i) Exemption

As background, FLSA Section 7(i) exempts a retail or service establishment employee from the FLSA’s overtime pay requirements if (i) the employee’s regular rate of pay exceeds 1.5 times the federal minimum wage for any week in which the employer seeks to claim the exemption and (ii) more than half of the employee’s compensation “for a representative period (not less than one month)” represents commissions on goods and services.  29 U.S.C. § 207(i).  In Opinion Letter FLSA2019-13, the WHD provided guidance on the representative period requirement, addressing whether four weekly pay periods or two bi-weekly pay periods, or alternatively, six consecutive weekly pay periods or three bi-weekly pay periods constitute a valid representative period.

As the WHD observed, the implementing regulations provide no guidance on the meaning of the phrase “not less than one month” other than the self-evident statement that the period cannot “be less than 1 month.”  29 C.F.R. § 779.417(c).  Accordingly, the WHD proceeded to interpret this language, guided by the Supreme Court’s holding in Encino Motorcars, LLC v. Navarro that FLSA exemptions receive a fair and appropriate reading.  Relying on Supreme Court and other case law, the WHD posited that a fair reading of a “month” is a “calendar month”—i.e., the period of time from a given day of a particular month in the calendar to the corresponding day of the following month.  Under this interpretation, the WHD concluded that four weekly pay periods or two bi-weekly pay periods are not a calendar month because, with the exception of February, “four weeks from any given date of one month will necessarily fall short of the corresponding date of the next month,” but that six consecutive weekly pay periods or three bi-weekly pay periods would satisfy the calendar month requirement.  The WHD also cautioned that a six-week period may not be “representative”—a separate requirement for the Section 7(i) exemption—and declined to analyze whether the period at issue was sufficiently “representative.”

©2019 Epstein Becker & Green, P.C. All rights reserved.

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About this Author

Jeffrey H. Ruzal, epstein becker green, new york, fair labor, employment
Member

JEFFREY H. RUZAL is a Member in the Labor and Employment practice, in the New York office of Epstein Becker Green.

Mr. Ruzal's experience includes:

  • Representing employers in employment-related litigation in federal courts and before administrative agencies

  • Representing employers in the defense of putative collective actions under the Fair Labor Standards Act and class actions under the New York State Wage and Hour Law

  • ...

212-351-3762
Carly Baratt, Epstein Becker Law Firm, New York, Health Care, Labor and Employment Litigation Attorney
Associate

Carly Baratt is an Associate in the Employment, Labor & Workforce Management and Litigation & Business Disputes practices, in the New York office of Epstein Becker Green.

Ms. Baratt:

  • Represents clients in employment-related litigation on a broad array of matters, including claims of discrimination, harassment, retaliation, wrongful termination, and breach of employment contract

  • Counsels clients in the health care and financial industries through a range of investigations and enforcement proceedings brought by federal and state agencies, including the U.S. Department of Justice, the Securities and Exchange Commission, the Financial Conduct Authority, the Financial Industry Regulatory Authority, the Commodity Futures Trading Commission, the Office of the Special Inspector General for the Troubled Asset Relief Program, the New York State Department of Financial Services, the New York State Office of the Attorney General, the U.S. Department of Labor, the U.S. Department of Health and Human Services’ Office of Inspector General, and the Federal Transit Administration

  • Represents clients in actions involving residential mortgage-backed securities; securities, accounting, bank, or health care fraud; and violations of the Foreign Corrupt Practices Act

  • Defends clients in False Claims Act and Anti-Kickback Statute cases (including qui tam litigation)

212-351-4674