DOL Released New FLSA Opinion Letters on Targeted Topics
This past month, the U.S. Department of Labor released several new opinion letters of rather targeted interest. Opinion letters respond to a wage-hour inquiry to the DOL from an employer or other entity, and represent the DOL’s official position on that particular issue. Other employers may then look to these opinion letters for guidance. In this instance, the letters offer guidance on very specific exemptions from the Fair Labor Standards Act’s minimum wage and overtime pay requirements: the outside sales exemption in the context of using an employer’s mobile assets and for product demonstrators, manufacturer incentive payments and the minimum wage, and the commission standard for retail or service commission sales exemption.
Outside Sales Exemption and Use of Employer’s Mobile Assets – FLSA2020-6. The FLSA provides an exemption for outside sales employees whose primary duty is to make sales and who are customarily and regularly away from the employer’s place of business in performing that primary duty. The DOL found that salespeople who travel in stylized trucks to high-population areas and events to sell products and service contracts to consumers qualify for the outside sales exemption.
Third-Party Incentive Payments and the Minimum Wage – FLSA2020-7. The DOL noted that third party incentive payments for work done on behalf of the employer may be credited towards an employer’s minimum wage obligation where the parties agree. Such agreement may be implied based on the particular circumstances, including the understanding and practices of the parties. Relevant factors include (1) whether the specific requirements for receiving the payment are known by the employees in advance; (2) whether the payment is for a reasonably specific amount; and (3) whether the employer’s facilitation of the payment is more than serving as a pass-through vehicle. In this case, sales incentive payments from automotive manufacturers were found to be wages, as the employees knew of the specific incentive program terms, while the dealerships learn the program terms, communicate them to the employees, and work with the program sponsors to determine when payments should be made.
Outside Sales Exemption and Product Demonstrators – FLSA2020-8. Salespeople who travel to non-third-party retail operations (e.g. trade shows, home and garden shows, and fairs) and set up displays to exhibit and demonstrate products for sale qualify for the outside sales exemption, according to the DOL. The primary duty of those employees is to make direct sales, and they perform that duty away from the employer’s place of business.
At a third-party retailer, like a big-box store, however, sales are typically made through the retailer rather than directly. Thus, the salespeople will only qualify for the exemption if they obtain a commitment to buy from the customer and are credited with the sale. No exemption exists if their work is general promotional work intended to stimulate overall sales for their own employer.
Retail or Service Commission Sales Exemption – FLSA2020-10. The FLSA provides an exemption where an employee is employed by a retail or service establishment at a regular rate of pay that exceeds one and a half times the minimum wage rate, and more than half their compensation for a representative period consisting of not less than a month is commissions. In the case of new employees or a new store opening where it is not clear if commissions will constitute more than half of compensation during the representative period, an employer may apply the exemption simultaneously with the beginning of the representative period. But if, at the end of the initial representative period, the requirement that commissions represent more than half of compensation has not been met, the employer must pay the overtime premium for any overtime hours worked during that period. The employer could then start a new representative period and again prospectively claim the exemption, subject to the same overtime caveat if the commissions standard is not met.