The Fair Labor Standards Act (FLSA) requires that all employers covered by the FLSA pay their employees overtime wages for hours worked over 40 hours per workweek. Generally, “overtime” wages are 1.5 times the regular wage. The FLSA, however, identifies several classes of employees who are exempt from the overtime provision. One such class of exempt employee is the “retail service commission” employee.
To qualify as an exempt “retail service commission” employee, three elements must be satisfied: (1) the employer is a retail or service establishment; (2) the employee’s regular rate of pay exceeds 1.5 time the applicable minimum wage; and (3) more than half of the employee’s compensation in a “representative period” must consist of commissions. If the employee does not satisfy all three elements, the employer must pay overtime wages for those hours worked over 40 per workweek.
To satisfy the first element, the employer must be a retail or service establishment. A retail or services establishment is one which sells goods or services to the general public. Under federal regulation, typical retail or services establishments are as follows: “Grocery stores, hardware stores, clothing stores, coal dealers, furniture stores, restaurants, hotels, watch repair establishments, barber shops, and other such local establishments.” 29 C.F.R. § 779.318(a). If the employer falls under any of those categories, the employer will likely qualify as a retail or service establishment.