Staffing firms considered 'retail or service' for FLSA overtime purposes

The U.S. Department of Labor's (DOL) Wage and Hour Division (WHD) recently issued an opinion letter declaring staffing firms may be considered a "retail or service establishment." Therefore, they pass the threshold question for purposes of the Fair Labor Standards Act (FLSA) overtime pay exemption. Even though the opinion letter was specific to staffing firms, it may have a broader impact on other businesses that historically haven't been thought of as "retail."

Background

The WHD is the agency responsible for enforcing federal wage and hour laws. From time to time, it issues opinion letters interpreting the FLSA, which addresses employers' minimum wage and overtime obligations. As long as a business adheres to the agency's opinion letter, it has a good-faith-reliance defense for actions that otherwise may constitute violations of the Act. The defense protects employers from paying liquidated (double) damages.

Certain employees of "retail or service establishments" who meet the following three requirements are exempt from the FLSA's overtime requirements:

• They work at a retail or service establishment;
• Their regular pay rate exceeds one and one-half times the applicable minimum wage; and
• Commissions make up more than 50% of their earnings in a representative period.

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