Chapter § 2-55 29 CFR § 779.411. Employee of a "Retail or Service Establishment"

• Jurisdiction: United States

2-55 29 CFR § 779.411. Employee of a "Retail or Service Establishment"

In order for an employee to come within the exemption from the overtime pay requirement provided by section 7(i) for certain employees receiving commissions, the employee must be employed by a retail or service establishment. The term "retail or service establishment" is defined in section 13(a)(2) of the Act. The definition is set forth in § 779.24; its application is considered at length in Subpart D of this part. As used in Section 7(i), as in other provisions of the Act, the term "retail or service establishment" means an establishment 75 percent of whose annual dollar volume of sales of goods or services (or of both) is not for resale and is recognized as retail sales or services in the particular industry.

2-55:1 Commentary

2-55:1.1 Qualifying as a Retail or Service Establishment

The FLSA provides for an exemption for those employed in the retail/service establishment. The exemption is applicable if 75 percent of an employer's annual sales volume consists of the sales of good or services that are not for resale, serves the everyday needs of the community, and acts as a point-of-sale at the end of the distribution chain. One Texas court looked extensively at this exemption:

• Collins v. Horizon Training Ctrs., No. 3:02-CV-1310-L, 2003 U.S. Dist. LEXIS 17271 (N.D. Tex. Sept. 30, 2003) (court grants summary judgment to employer under exemption, finding that employer, which operated as a school teaching computer and software training to the public, satisfied the exemption requirement; court notes in its analysis that the employer satisfied the further requirement that the sale of these services is considered "retail" in its particular industry).

A federal district court in Texas in a case issued a detailed opinion on this topic.

• Casanova v. Gold's Tex. Holdings Grp., Inc., No. 5:13-CV-1161-DAE, 2016 U.S. Dist. LEXIS 48411 (W.D. Tex. Apr. 11, 2016) (athletic and training club would qualify where the club was open to the general public and sold memberships that were not for resale; however there was not a bona fide commission noting that the main factors in establishing same are (a) the commission is either a percentage or proportion of the ultimate price passed onto the consumer and (b) the commission is decoupled from actual time worked so there is an incentive for the employee to work more efficiently and effectively).

The Collins case is also instructive, in as much as it rejected an affidavit of an expert who summarily concluded that the defendant did not satisfy the requirements of the exemption, noting that "unsupported speculation is not...