Retail, Sales & Other FLSA Exemptions

Whereas the COVID-19 pandemic stays a problem to employers nationwide, the U.S. Division of Labor’s Wage and Hour Division (“WHD”) continues to area non-COVID-related wage and hour questions. On June 25, 2020, the WHD issued 5 new opinion letters addressing the surface gross sales, administrative, and retail or service institution exemptions underneath the Honest Labor Requirements Act (“FLSA”), in addition to the connection between third-party funds to staff and the FLSA’s minimal wage requirement. Employers ought to be aware of these helpful explanations of key FLSA ideas.

FLSA2020-6

In FLSA2020-6, the WHD analyzed the applicability of the FLSA’s exterior gross sales exemption to salespeople paid a base wage and fee to journey to completely different places to promote merchandise utilizing their employer’s cellular belongings. As transport, the salespeople use stylized vehicles stocked with merchandise, advertising and marketing shows, and demonstration models. The salespeople use digital tablets to make their shows. They spend 80% of their time on gross sales deployments and 20% of their time dealing with sales-related duties comparable to occasion planning and stock administration. They handle their “occasion calendar” and how one can inventory the truck for every deployment. They obtain gross sales coaching from the employer.

To fulfill the surface gross sales exemption, an worker’s major obligation should be “making gross sales” to or “acquiring orders or contracts for providers” from clients (with “sale” together with gross sales work and work carried out incidental to and along side gross sales/solicitations), and the worker should be “typically and repeatedly engaged” in performing that obligation “away from the employer’s place or locations of enterprise.” 29 CFR §§ 541.500(a), -.501, -.502; see additionally 29 U.S.C. § 203(okay).

The WHD discovered these standards glad right here. First, that the workers’ major obligation is to make gross sales and to acquire orders for providers is evident from the truth that they (1) journey to shopper places to promote tangible merchandise and to acquire signatures for service contracts; (2) earn a fee on their very own gross sales; and (3) obtain gross sales coaching. Workers who spend greater than half their time performing exempt work usually fulfill the first obligation requirement (29 C.F.R. § 541.700(b)), and even the 20% of their working time spent on sales-related actions furthers their very own out-of-office gross sales efforts, thereby constituting exempt gross sales actions underneath the FLSA.

Second, the workers are typically and repeatedly away from the employer’s place of work as a result of they spend 80% of their working time deployed away from the employer’s place of work, which exceeds the “higher than occasional however … lower than fixed” normal (29 C.F.R. § 541.701). Right here the WHD famous that the vehicles themselves will not be “locations of companies”—i.e., a “mounted website…utilized by a salesman as a headquarters.” Not solely do these vehicles transfer to and from a special gross sales website on daily basis, however as soon as on the website, the workers exit into the crowds to mingle with shoppers, which is analogous to a salesman who drives to a neighborhood after which solicits gross sales door to door— an instance falling squarely inside the exterior gross sales exemption.

FLSA2020-7

As background, the FLSA requires employers to pay their lined, nonexempt staff a minimal hourly wage for all hours labored. 29 U.S.C. § 206(a). Wages underneath the FLSA might embody third-party funds. A fee from a 3rd social gathering is a wage when the employer and worker have an settlement, specific or implied, to deal with it as such. 29 C.F.R. § 778.108. Within the Third Circuit’s view, different info that could be probative in figuring out whether or not a third-party fee is a part of an implied employment settlement embody (1) whether or not the precise necessities for receiving the fee are recognized by the workers prematurely of their performing the related work; (2) whether or not the fee is for a fairly certain amount; and (3) whether or not the employer’s facilitation of the fee is greater than serving as a pass-through car, as with, e.g., processing ideas. U.S. Dep’t of Labor v. Bristol Excavating, Inc., 935 F.3d 122, 137 (3d Cir. 2019).

In FLSA2020-7, the WHD analyzed whether or not funds to car gross sales consultants from producers pursuant to an incentive program are wages for functions of the using dealership’s FLSA’s minimal wage necessities. Concluding that these funds are wages, the WHD emphasised that the dealerships embrace these third-party incentive funds as wages, the workers know of the precise program incentive phrases prematurely of their performing gross sales work, and the dealership facilitates these funds by speaking these phrases to their staff and dealing with incentive program sponsors to find out when funds ought to happen.

FLSA2020-8

In FLSA 2020-8, the WHD analyzed whether or not the FLSA’s exterior gross sales exemption applies to salespeople who journey to varied retail operations—house and backyard reveals, commerce reveals, state and county festivals, and big-box shops—for gross sales demonstrations/pitches lasting, on common, 10 days, with nobody retail location used for greater than 30 whole days per yr. The salespeople obtain gross sales coaching, earn commissions, and are eligible for bonuses primarily based on purchases clients make throughout their assigned reveals. At retail operations reveals, clients pay the retailer, and a portion of these gross sales passes by to the employer. In any respect different reveals, the salespeople course of the fee immediately and no third-party retailer is concerned.

The WHD suggested that the salespeople at places aside from big-box shops qualify for the surface gross sales exemption, whereas the salespeople at huge field shops qualify for the exemption provided that their major obligation is performing gross sales work directed towards the consummation of their very own gross sales. In drawing this distinction, the WHD defined that salespeople at reveals and festivals promote merchandise on to shoppers and that the employer hires them for his or her gross sales expertise. They earn commissions and bonuses primarily based on purchases at these reveals (i.e., their very own gross sales) and obtain gross sales coaching. In distinction, staff at big-box shops buy the merchandise by the third-party retailer, not from the worker immediately, and thus the workers’ major obligation will not be “making gross sales.” To make gross sales inside the which means of the exemption, the worker should receive a dedication to purchase from the client and obtain credit score for the sale. With out details about whether or not and the way an worker obtains a dedication from a buyer to purchase the employer’s merchandise, the WHD couldn’t say whether or not the info fulfill this normal. However, the workers should be eligible for the surface gross sales exemption in the event that they spend the vast majority of their time in non-big field location gross sales pitches—i.e., if their major obligation is performing exempt work. 29 C.F.R. § 541.700(a). As a reminder, spending the vast majority of one’s time on exempt exercise just isn’t a vital ingredient in establishing the first obligation, however time is a related a part of the first obligation inquiry.

The WHD additionally concluded that the workers in any respect places are typically and repeatedly away from the employer’s place of work as a result of the gross sales places will not be mounted, and the workers used none of those places for greater than a restricted length. 29 C.F.R. § 541.502. Moreover, the WHD has lengthy held that the surface gross sales exemption encompasses gross sales someplace in addition to a buyer’s house or workplace.

FLSA2020-9

FLSA 2020-9 analyzes whether or not emergency-management coordinators employed by a county authorities qualify for the discovered skilled or administrative exemptions to the FLSA. The coordinators will need to have a bachelor’s diploma in public administration, political science, emergency administration, or a associated area; certification in particular programs supplied by FEMA Emergency Administration Institute; and shortly, a state certification in emergency administration. The coordinators’ duties embody, inter alia, helping colleges, organizations, and industries with emergency operation plans; coordinating group assets; reporting actions and circumstances accordingly; requesting help as wanted; organizing catastrophe drills and workout routines for all phases of emergency administration; reviewing outcomes; and making enhancements.

To qualify for both the skilled or administrative exemption, usually an worker should obtain compensation on a wage or price foundation at not lower than the usual degree and will need to have a qualifying major obligation. 29 C.F.R. §§ 541.200(a)(1), -.300(a)(1). The first obligation of an exempt discovered skilled should be performing work that requires superior information (i.e., work that’s predominantly mental in character rand requires the constant train of discretion and judgment) in a area of science or studying typically acquired by a chronic course of specialised mental instruction. 29 C.F.R. § 541.301(a). The first obligation of an exempt administrative worker should be performing workplace or non-manual work with discretion and unbiased judgment with respect of issues of significance and should relate on to administration or basic enterprise operations of the employer/employer’s clients. 29 C.F.R. § 541.200(a)(2)-(3).

Recognizing the problem in figuring out whether or not the job duties of presidency positions are exempt underneath the executive place, the WHD regarded as to whether the duties contain the day-to-day finishing up of the federal government’s features or, however, operating the federal government itself. Underneath this framework, the WHD concluded that sure of the coordinators’ duties are exempt and others will depend upon the circumstances of how and when these duties are exercised and exactly what they entail. At a excessive degree, the WHD characterised the coordinators’ planning and enterprise administration duties as largely exempt as a result of they immediately relate to the administration or basic enterprise operations of the employer or the employer’s clients. Likewise exempt are the coordinators’ duties of dealing with the county’s relationships with different federal, state, and native and authorities entities; making ready information releases, performing as a press officer, and furnishing info to the media; recruiting, supervising, and scheduling volunteers; and writing and reviewing grant proposals.

Missing the requisite info, the WHD didn’t try and determine the coordinators’ major obligation. Equally, the WHD didn’t analyze the discretion and unbiased judgment ingredient as a result of the employer represented that this requirement was glad.

The WHD famous that it couldn’t advise on whether or not the coordinator place qualifies for the discovered skilled doctrine.

FLSA2020-10

As background, the retail or service institution commissioned gross sales exemption applies if (1) the worker is employed by a retail or service institution; (2) the worker’s common price of pay exceeds one and one-half occasions the minimal hourly price; and (3) greater than half of the worker’s compensation for a consultant interval (not lower than one month) consists of commissions on items or providers. 29 U.S.C. § 207(i); 29 C.F.R. § 779.412.

In FLSA2020-10, the WHD analyzed whether or not the retail or service institution commissioned gross sales exemption is out there the place:

The consumer hires staff to work at a brand new retailer with unknown quantity or new salespeople with no monitor file of constructing gross sales, who’re assured compensation at one and one-half occasions the relevant minimal wage for all hours labored throughout a consultant interval;

The commissions requirement just isn’t met each week; and

The consumer can not decide whether or not greater than half of the compensation that the salesperson will obtain by the tip of the total consultant interval will encompass gross sales commissions on the finish of the consultant interval.

The WHD reaffirmed that an employer can use the Part 7(i) exemption concurrently with graduation of the consultant interval. In step with its earlier steerage, the WHD cautioned that if on the conclusion of the preliminary consultant interval, the worker’s commissions don’t represent greater than half of his or her compensation, the worker should obtain extra time premium compensation for any extra time hours labored throughout that interval. The employer may once more try to determine a consultant interval for the brand new worker and concurrently declare the Part 7(i) exemption for that worker on a potential foundation.