On June 26, 2020, the U.S. Department of Labor (DOL) issued several unrelated opinion letters dealing with non-COVID wage and hour issues.
Specifically, two of the opinion letters, FLSA2020-6 and FLSA2020-8, deal with the outside sales exemption to the Fair Labor Standards Act (FLSA). Under that exemption, the FLSA's minimum wage and overtime requirements do not apply to employees: (a) whose primary duty is making sales (or obtaining contracts for services or the use of facilities); and (b) who customarily and regularly are engaged away from the employer's place of business.
In one of the new opinion letters, FLSA2020-6, the DOL found that sales employees who spent four days of a five-day workweek driving to sell goods from the truck qualified for the outside sales exemption. The DOL determined that these employees were making sales 80 percent of their time and the trucks were not a fixed place of work. Since the employees drove to various locations, they were not working out of a "place of business."
And, in the other new opinion letter dealing with the outside sales exemption, FLSA2020-8, the salespeople in question regularly traveled to trade shows and big-box retailers to both give demonstrations for the products they were selling and to make sales. The DOL found that these employees were in fact selling versus relying on third-party retailers to sell, and therefore were eligible for the outside sales exemption.
In another opinion letter, (FLSA2020-7), the DOL found that employers (in this situation car dealers) could count manufacturer incentive payments made to the sales team as payments to satisfy minimum wage requirements. However, the DOL cautioned that not all third-party payments will constitute wages under the FLSA. That determination depends on the terms of the employment agreement, express or implied. In this instance, while the dealership and the salesmen did not have an explicit agreement, the manufacturer incentives were implicitly understood to be wages. The dealers worked with the salesmen to understand the details of the incentive program and assist them to earn them.
In a fourth opinion letter, FLSA2020-10, the DOL opined about the retail or inside sales exemption under Section 7(i) of the FLSA. Specifically, a retail or service establishment's employee is exempt from overtime entitlement if the employee's regular rate of pay exceeds 1.5 times minimum wage and more than half of the employee's compensation for a representative period (not less than one month) is earned from commissions on goods and services.
In the opinion letter, the DOL assumed the requirements of the exemption were met but addressed the issue of an employer starting a new representative period to determine if one half of the employee's compensation was from commissions. Relying on WHD Opinion Letter FLSA-897, the DOL found that if the employee did not meet the test in the initial representative period established by the employer, overtime would be owed for that lookback. But the DOL allowed the employer to establish a new representative period and claim the exemption if the employee's compensation meets the test on a prospective basis.
DOL opinion letters are not binding in court, but can serve as a useful guide for employers deciding on worker payment issues. And, relying on an opinion letter can bolster an employer's defense that it acted in good faith with respect to wage and hour decisions.
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