Benefits And Compensation

Staffing Corporations Acquire Further FLSA Extra time Safety

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Non permanent staffing corporations might qualify as “retail or service institutions” and subsequently could possibly apply the Truthful Labor Requirements Act’s (FLSA) “retail gross sales” extra time exemption to a few of their staff, in keeping with a latest opinion letter from the U.S. Division of Labor (DOL).

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The brand new opinion might present important advantages to staffing firms with an inside gross sales pressure or commissioned recruiters of their enterprise operations.

How We Received Right here

For the previous 2 a long time, FLSA lawsuits have elevated greater than 200%. The DOL and the federal courts have broadly construed the Act’s protections, making it tougher for employers to show an worker—even one who is very paid—falls inside one of many extra time exemptions.

The U.S. Supreme Courtroom altered the taking part in subject in Encino Motorcars, LLC v. Navarro, which mentioned a slim building of the FLSA’s exemptions was improper. As a substitute, the exemptions must be “pretty” interpreted since they’re “as a lot part of the [Act’s] function because the overtime-pay requirement.” The ruling led the DOL to revisit the way it has interpreted the exemptions, together with within the latest “retail gross sales” opinion letter, issued on January 19, 2021.

What Retail Gross sales Exemption Says

The retail gross sales exemption, contained in 29 U.S.C. § 207(i), offers an worker is exempt from the FLSA’s extra time (however not the minimal wage) necessities if she (1) works at a “retail or service institution,” (2) has a daily price of pay exceeding one and one-half occasions the relevant minimal wage, and (3) has earnings in a consultant interval comprised of greater than 50% commissions. Workers who qualify for the exemption don’t must be paid on a wage foundation.

A enterprise qualifies as a “retail or service institution” if:

  • It’s engaged within the making for promoting of products or providers;
  • At the very least 75% of the enterprise’ gross sales for items or providers, or each, should be acknowledged as retail within the related trade; and
  • Not more than 25% of the corporate’s gross sales for items or providers could also be gross sales for resale.

With regard to the primary aspect, the DOL had lengthy restricted software of the “retail or service institution” label solely to retail companies that promote items or providers to shoppers. A number of courts held the company’s view was incorrect, nevertheless, and {that a} enterprise promoting its items or providers to different business enterprises additionally might additionally qualify as a retail or service institution. The company has since adopted the identical place.

As as to whether a enterprise is “acknowledged as retail” within the trade (the second aspect listed above), the DOL had lengthy taken the view that the enterprise will need to have a “retail idea,” which suggests it:

  • Sells items or providers to most people;
  • Serves the on a regular basis wants of the neighborhood;
  • Is situated on the very finish of the distribution stream;
  • Dispenses its merchandise or expertise in small portions; and
  • Doesn’t participate within the manufacturing course of.

Transferring from One Record to One other

The DOL had revealed a listing of industries it acknowledged did not have a “retail idea,” and the record included staffing firms. Some courts criticized the record, nevertheless, as “incomplete, arbitrary, and primarily a senseless catalog,” including it did “not seem to move from any cohesive standards.”

Based mostly on the criticisms and in mild of Encino Motorcars, the DOL withdrew the record on Could 19, 2020. Then, in an August 31 opinion letter, it reiterated {that a} enterprise could be a “retail or service institution” even when it sells its items or providers to different business clients.

Accordingly, in analyzing whether or not staffing corporations qualify as “retail or service institutions,” the DOL concluded:

  • The staffing firms present their “providers to companies in most people, which can serve the employment wants of the neighborhood by which the companies are situated”;
  • “The position of a [temporary] employee is the ‘finish of the stream of distribution’,” and staffing firms don’t place employees “in bulk” or interact in manufacturing; and
  • “[A] typical staffing agency might have a retail idea, and its gross sales of recruitment and staffing providers could also be correctly acknowledged as retail by the staffing trade.”

The DOL additionally concluded staffing corporations can meet the third requirement of a “retail or providers institution” as a result of they don’t sometimes “resale” a short lived employee to its buyer.

Opinion Letter’s Impression

The DOL’s newest opinion letter offers staffing firms with a possibility to reevaluate their compensation techniques for among the commissioned positions inside the group. Inside gross sales and recruiter positions, which usually don’t qualify for the “exterior gross sales” or “administrative” exemptions, might qualify for the retail gross sales exemption.

Have in mind, nevertheless, the DOL’s opinion is predicated on details offered to it, and staffing firms primarily serving as secondary suppliers might not fall inside the company’s conclusion. Additionally, the brand new letter applies solely to the FLSA, and state legal guidelines might differ.

Lastly, even when a place qualifies for the retail gross sales exemption, you should nonetheless file the worker’s work time to make sure the person’s common price of pay exceeds one and one-half occasions the minimal wage throughout a given interval.

Steven J. Whitehead is an legal professional and the chair of the employment and labor relations division at Taylor English Duma LLP in Atlanta, Georgia. You possibly can attain him at [email protected].

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