Paul DeCamp Quoted in "New DOL Rule Lets More Employers Assert OT Exemption"

Fewer workers who get commissions will be eligible to receive overtime pay under federal law after the U.S. Department of Labor issued regulations Monday expanding how many employers can qualify as “retail” businesses that may fall under an exemption to the Fair Labor Standards Act.

The DOL issued a final rule, to be published in Tuesday’s federal register and take effect right away, that revamps the agency’s regulatory framework surrounding Section 7(i) of the FLSA, which allows certain employees of “retail or service establishments” who get paid mostly on commission to be deemed overtime exempt.

The new rule withdraws from the DOL’s existing regulations a partial list of industries that the agency presumed to have “no retail concept,” a designation that left them unable to claim the 7(i) exemption. The final rule also pulled a second, non-exhaustive list of businesses that “may be recognized as retail” for purposes of the exemption.

By axing the two lists, the agency said it is “promot[ing] consistent treatment” in determining whether the 7(i) exemption applies by using “the same analysis to all establishments,” and added that businesses on the nonretail list can now potentially avail themselves of the 7(i) exemption if they meet the DOL’s criteria for applying the exemption. The DOL also said that courts “have questioned the reasoning behind” the lists.

Moreover, the DOL said its rule will “reduce confusion” since the second list “did not necessarily affect the analysis” of whether businesses included in that catalog were, in fact, retail operations for purposes of the exemption. …

Businesses must also show that the worker’s regular rate of pay is at least one-and-a-half times greater than the applicable minimum wage for every hour someone works in a week in which they work overtime, and that at least half of the worker’s total earnings in a “representative period” are commissions, according to the DOLs criteria.

Paul DeCamp, head of Epstein Becker & Green PC’s wage and hour practice and former WHD administrator during the George W. Bush administration, told Law360 that businesses with commissioned employees “have struggled with figuring out whether they’re covered by the Section 7(i) exemption” in the half century since the lists at issue were last updated.

He added that there was “no rhyme or reason” for having them since the DOL’s standard for determining whether a business qualifies as a retail or service establishment can be applied to any industry.

“If you’re a business that is on the list of industries where there is no ‘retail concept’ according to the DOL, you’re in a kind of limbo because there’s a regulation, you worry that courts might defer to it … and so you’re taking a risk if you say, ‘Notwithstanding what that list says we’re still going to apply 7(i),’” he said. “Then if you’re not on either list — if you’re an industry that is new or just wasn’t covered by these two lists then you had to make a guess about, ‘Well, what the heck are we supposed to do with this?’”

With the new rule withdrawing the lists in place, DeCamp said he believes that businesses “in a variety of circumstances” will be prompted to review their practices surrounding commissioned-based workers, including whether they should use them, how they would use them if they are going to, how to schedule those workers.

“What we’ll see now is I suspect a number of businesses [will be] taking a fresh look at the issue and saying, ‘Alright, let’s forget these lists and let’s take a look at what the regulations actually say in terms of the test that the DOL sets forth,” DeCamp said.