Wasting Away -- DOL Opines That Oil Waste Services Company Has a Retail or Service Concept
“What you do speaks so loudly that I cannot hear what you say”
-- Ralph Waldo Emmerson
On August 31, 2020 the U.S. Department of Labor (“DOL”) published an official Opinion Letter regarding the new “retail concept” regulations expanding the overtime exemption to the Fair Labor Standards Act (“FLSA”) imposed on May 19, 2020. Abrahams Wolf-Rodda posted a blog discussing those changes at the time. The largest difference that 85 FR 29867 made was to remove a long list of businesses that categorically could not qualify as having a retail concept for purposes of the “retail or service establishment” overtime exemption from the FLSA. For a longer discussion on this change please visit our website here: https://www.awrcounsel.com/blog/2020/5/27/a-department-of-labor-no-brainer-removing-arbitrary-restrictions-concerning-the-retail-concept.
The purpose of the August 31, 2020 Opinion Letter is to apply the new regulations to one of the businesses that had been previously categorically excluded from the exemption. A private oilfield service company requested an opinion from the Wage and Hour Division on whether some of their truck drivers would qualify under the exemption as employees of a “retail or service establishment.” Generally, businesses who qualify for the exemption under 29 U.S.C. § 207(i) are exempt from paying overtime to some of their employees. To qualify for the exemption the employee must be one “(1) who works at a retail or service establishment; (2) whose regular rate of pay exceeds one and one-half times the federal minimum wage; and (3) whose earnings in a representative period are composed of more than fifty percent commissions.” 29 U.S.C. § 207(i). Factors two and three are easily shown; pay stubs are sufficient. However the first factor requires that the (1) business engage in selling either goods or services, (2) have 75 percent of its sales be recognized as retail in the industry, and (3) not have more than 25 percent of sales be sales for resales. 29 CFR § 779.313.
The oilfield service company passed the first factor by showing that it provides the service of transporting oilfield waste from its site of creation to a disposal facility. The fact that most of its clients were commercial rather than the rural or urban homeowners was immaterial. The DOL discussed the retail concept in the second factor and pointed out that waste removal had previously been persona non grata with regard to the retail concept test. Here, however, the DOL went through the normal test set forth in 29 CFR § 779.318 and determined that the waste removal service did indeed have a retail concept. In making its decision the DOL found the fact that the service company did not use specialized waste removal equipment in their commercial business that would have rendered the services unusable to the general consumer important. Additionally they were persuaded by the fact that waste removal service serves the “every day needs of the community” and that since the waste was being disposed of means that it is part of the “end stream of distribution”. Furthermore, the waste removal company was not involved in the manufacturing of a good.
Having determined that the company had a retail concept and since not more than 25 percent of the company’s sales were made to be resales, the DOL determined that this particular oilfield waste removal company would qualify to be a retail or service establishment. Accordingly, the workers were deemed to be eligible for the overtime exemption under the FLSA.
DOL does not investigate before issuing these opinion letters and they make their determination on the facts told to them by the requester. Having said that, this particular letter is important because it shows that the DOL has implemented the new regulations, and more importantly provides a framework for how companies that were previously excluded as not having a retail concept, may be included after the May 19th regulations. So, again, we urge you to take a look at the exemption and the factors for inclusion because it provides a new option for employers with respect to exemptions from and compliance with the FLSA.
For more information on the Opinion Letter visit the DOL website at https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/2020_08_31_11_FLSA.pdf.