Thursday, September 3, 2020
On August 31, 2020, the Wage and Hour Division of the U.S. Division of Labor (DOL) issued 4 opinion letters, certainly one of which, Opinion Letter FLSA2020-11, addressed whether or not sure workers within the oilfield providers business had been exempt from the time beyond regulation necessities of the Truthful Labor Requirements Act (FLSA). The particular query answered by the DOL in FLSA2020-11 concerned truck drivers of an oilfield waste-removal firm and the “retail or service institution” time beyond regulation exemption of the FLSA (29 U.S.C. § 207(i), higher generally known as the “Part 7(i) exemption”). The DOL thought of the information and circumstances of the business and work carried out, in addition to authorized precedent and just lately modified modifications in FLSA rules, and decided that the drivers appeared to qualify for the time beyond regulation exemption—reversing 50 years of regulatory exclusion.
The opinion opens the door for extra companies to qualify for exemption as retail or service institutions underneath the DOL’s said aim, introduced in Might 2020 when the company withdrew sure institution lists, of “promot[ing] constant remedy when evaluating part 7(i) exemption claims by treating all institutions equally underneath the identical requirements and allow[ting] the reevaluation of an business’s retail nature as developments progress over time.”
Background and Historical past of the Part 7(i) Exemption
The opinion letter states that Part 7(i) of the FLSA exempts from time beyond regulation pay necessities “sure workers of ‘retail or service institution[s]’ … (1) who work at a retail or service institution; (2) whose common charge of pay exceeds one and one-half instances the federal minimal wage; and (3) whose earnings in a consultant interval are composed of greater than fifty % commissions.”
The DOL has interpreted the brink “retail or service institution” issue as follows: “(1) a enterprise should ‘have interaction within the making of gross sales of products or providers’; (2) ‘75 % of its gross sales of products or providers, or of each, have to be acknowledged as retail within the specific business’; and (3) ‘not over 25 % of its gross sales of excellent or providers, or of each, could also be gross sales for resale.’”
Citing 29 C.F.R. § 779.318(a), the DOL famous that the institution should even have a “retail idea,” which suggests it usually:
“sells items or providers to most people;”
“serves the on a regular basis wants of the group;”
“is on the very finish of the stream of distribution;”
“dispos[es] in small portions [its] merchandise or expertise;” and
“doesn’t participate within the manufacturing course of.”
When the Part 7(i) exemption was added to the FLSA in 1961, the DOL issued an interpretive rule itemizing 89 kinds of institutions that it considered as missing a “retail idea.” In 1970, the DOL added an inventory of one other 45 institutions, together with “waste removing contractors,” that blocked the exemption’s software to oilfield service firms and drivers, akin to those at concern in Opinion Letter FLSA2020-11.
On the time Part 7(i) and its interpretive rules had been enacted, the courts and the DOL nonetheless held to the prohibitive customary that exemptions from the FLSA had been to be “narrowly construed” in opposition to employers, and to be able to qualify for them, institutions had been to be “plainly and unmistakably” throughout the phrases and spirit of the exemptions. With regard to retail and repair institutions, the exclusionary listing borne from this customary endured for 50 to 60 years.
Whereas the DOL’s listing was usually attacked by the courts as “arbitrary,” “incomplete,” and even “senseless,” it wasn’t till 2018 and the Supreme Court docket of america’ order that FLSA exemptions be considered by means of a “honest (moderately than a ‘slim’)” interpretive lens that the listing’s worth and existence turned severely questioned. As soon as Encino Motorcars, LLC v. Navarro, 138 S.Ct. 1134 (2018), opened the door to revisit long-held hostilities towards claimed exemptions, it was solely a matter of time earlier than stale and outdated requirements had been modified, changed, or eliminated. This included the oft-criticized, anachronistic nonretail listing, which was faraway from the rules on Might 19, 2020.
Utility to Oilfield Waste Elimination
After its categorical exclusion was eliminated, an oilfield waste removing firm sought an opinion from the DOL relating to whether or not the Part 7(i) exemption utilized to sure truck drivers who used heavy-duty vans and tools to take away fluid waste from buyer oilfield websites and transport it to disposal services. The pay charge and fee proportion prongs had been met, so the one concern was whether or not the corporate certified as a “retail or service institution.”
The DOL first decided that the removing of oilfield waste from clients’ oil properly places glad the “gross sales of products or providers” requirement for Part 7(i) exemption and that the truth that the providers had been bought to industrial entities didn’t matter. As for the popularity of these providers as “retail,” the DOL famous that the requirement may very well be supported by the opinions of business leaders however the institution nonetheless wanted to have a “retail idea” to satisfy the criterion. The DOL acknowledged the criticism of the previous exclusionary listing and vowed to use the identical evaluation to all institutions to find out their “retail idea,” thus studying the Part 7(i) exemption extra persistently. Unchained from the listing that routinely disqualified it, the oilfield waste removing firm may now fulfill the retail idea standards.
With regard to the “common public” criterion, the DOL decided that providers carried out for a industrial person could qualify “‘as long as [they] don’t require the usage of specialised services or tools and the providers are usually not totally different providers than these supplied for the final consuming public.’” (Brackets in authentic.) Offering the instance of the usage of the identical providers and tools for waste removing from rural septic tanks, the DOL discovered that the “common public” requirement was met. Likewise, the oilfield service firm’s removing of waste was deemed to serve “the on a regular basis wants of the group,” and gross sales of its providers to oilfield clients had been on the finish of the distribution chain and never gross sales for resale. For the reason that waste removing firms weren’t concerned within the manufacturing course of, the one query left unanswered was whether or not the corporate met the “disposing in small portions” issue, which relied on how the vans and the portions of waste eliminated in comparison with these usually discovered usually shopper waste-removal providers. The DOL concluded that total it appeared that the corporate had a retail idea and will qualify as a “retail or service institution” eligible to say the Part 7(i) exemption for its truck drivers.
Whereas the DOL’s discovering of a potential Part 7(i) exemption for oilfield waste removing firms is actually vital, the DOL’s evaluation in its opinion letter has a lot higher, far-reaching implications for the greater than 130 industries beforehand excluded from the exemption. Certainly, for half a century the prospect of a Part 7(i) exemption was a nonstarter for a broad and numerous part of the workforce. Now, the DOL has given the go-ahead to look at the chances, and the Supreme Court docket has laid the groundwork for a good interpretation of a claimed exemption. Employers beforehand included on the nonretail listing could discover this an opportune time to investigate job classifications and pay practices to see if the beforehand forbidden Part 7(i) exemption is out there.
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