Staffing firms gain additional FLSA exemption

Temporary staffing firms may qualify as “retail or service establishments” and therefore be able to apply the Fair Labor Standards Act’s (FLSA) “retail sales” overtime exemption to some of their employees, according to a recent opinion letter from the U.S. Department of Labor (DOL). The new opinion could provide significant benefits to staffing companies with an inside sales force or commissioned recruiters in their business operations.

How we got here

For the past two decades, FLSA lawsuits have increased more than 200%. The DOL and the federal courts have broadly construed the Act’s protections, making it more difficult for employers to prove an employee—even one who is highly paid—falls within one of the overtime exemptions.

The U.S. Supreme Court altered the playing field in Encino Motorcars, LLC v. Navarro, which said a narrow construction of the FLSA’s exemptions was improper. Instead, the exemptions should be “fairly” interpreted since they are “as much a part of the [Act’s] purpose as the overtime-pay requirement.” The ruling led the DOL to revisit how it has interpreted the exemptions, including in the recent “retail sales” opinion letter, issued on January 19, 2021.

What retail sales exemption says