In another of the six opinion letters issued by the U.S. Department of Labor on August 28, 2018, the DOL clarified in FLSA2018-21, that an employer that sells technology to merchants that allow them to accept credit card payments from mobile devices is indeed, a “retail or service establishment,” for purposes of the Fair Labor Standards Act exemption. While this seems to apply to a pretty limited amount of employers (for which the rest of you are wondering why you care about this and are still reading this post), the opinion letter provides guidance applicable to all.
First, the DOL references the recent U.S. Supreme Court Encino Motorcars case, noting that exemptions under the FLSA should be fairly – not narrowly – interpreted. Thus, the DOL recognizes that it “must apply a ‘fair reading’ standard to all exemptions to the FLSA – including the Section 7(i) exemption”. In doing so, the DOL opines that just because the employer sells its product to commercial entities does not mean it does not qualify for the retail and service establishment exemption. Further, the DOL notes that courts have confirmed that case law does not require a physical location accessed by the public, that a business is open to the public if they receive orders on the phone, for example.
Additionally, the DOL noted that the sales of the product (a credit card reading platform) are indeed retail sales – not wholesale, because the employer does not sell large quantities of the platform to individuals, but instead tailors the product to their customers who then use it for their clients. That being said, the DOL does caution that, while it has “considerable discretion”, the courts have final say with respect to whether sales are recognized as “retail” in a particular industry.
The result? The FLSA’s retail or service establishment exemption applies (and thus, no overtime is due) to employees of an employer that sells customer technology to commercial clients, so long as the employee’s regular rate of pay exceeds 1.5 times minimum wage in the workweeks they work overtime and commissions constitute more than half of their earnings (in other words, usually commissioned inside sales representatives).