Fact Sheet #6: Retail Industry Under the Fair Labor Standards Act (FLSA)

This fact sheet provides general information concerning the application of the FLSA to employees of the retail industry.

Characteristics

A retail establishment is an establishment 75% of whose annual dollar volume of sales is not for resale and is recognized as retail in the particular industry. The Wage and Hour Division applies the analysis in 29 CFR Part 779 to all establishments when determining whether an establishment qualifies as a retail establishment.

Coverage

Employees of retail establishments may be covered by the Act in either of two ways. Any retail establishment that is part of an enterprise with an annual dollar volume of sales of at least $500,000 (exclusive of excise taxes at the retail level that are separately stated) must abide by the Act's requirements. Any employee of a retail establishment, regardless of its sales volume, who is engaged in interstate commerce activities is "covered" on an individual basis. Some examples of interstate commerce activities are:

• Ordering goods from out-of-state;
• Verifying and processing credit card transactions;
• Using the mail or telephone for interstate communications;
• Keeping records of interstate transactions; or
• Handling, shipping, or receiving goods moving in commerce.

Requirements

Covered, non-exempt retail establishments are required to meet certain standards under the Act relative to wages and employment of minors.

Covered, non-exempt employees are entitled to the Federal minimum wage. Overtime pay at a rate not less than one and one-half times the employee's regular rate of pay is required after 40 hours are worked in a workweek. Certain retail or service employees paid by commissions may be exempt from overtime pay.

Youth Minimum Wage: The FLSA allows employers to pay a youth minimum wage of not less than $4.25 an hour to employees who are under 20 years old during the first 90 consecutive calendar days after initial employment by their employer. The law contains certain protections for employees that prohibit employers from displacing any employee to hire someone at the youth minimum wage.

The FLSA youth employment regulations prohibit the employment of minors under 14 years old in non-agricultural jobs, restrict the hours of work and limit occupations for 14- and 15-year-olds, and prohibit the employment of workers under 18 years old in hazardous occupations.

The Act requires employers to keep records of wages, hours, and other items, as specified in the recordkeeping regulations. Employers must keep records for employees subject to the minimum wage and overtime provisions as outlined in 29 CFR Part 516. Records required for exempt employees differ from those for non-exempt workers, for employees working under uncommon pay arrangements, or for employees to whom lodging or other facilities are furnished.

Typical Problems

Hours Worked: Employers must record and pay for all hours worked by employees including any time controlled by the employer, such as time spent "engaged to wait." Where employees report to work at their scheduled time, the employer must begin counting that as work time. However, if the employer immediately tells the employees that they are not needed, completely relieves them of duty, and gives them a specific report-back time which enables the employees to use the time for their own benefit, this time does not have to be counted as working time. If employees are only told to wait until they are needed, and are not given a specific report-back time that is long enough to use for their own benefit, all of the waiting time is to be counted as hours worked.

Illegal Deductions: Deductions made from employees' wages for such items as cash or merchandise shortages, required uniforms, and tools of the trade are not legal to the extent that they reduce the wages below the statutory minimum wage or reduce the amount of overtime pay.

Salaried Employees: A salary, by itself, does not exempt employees from the minimum wage or overtime. Whether employees are exempt from minimum wage and overtime depends on their job duties and responsibilities, as well as the salary paid. Often, in retail businesses, salaried employees do not meet all the requirements specified by the regulations to be considered as exempt from overtime pay. The regulations at 29 CFR Part 541 contain a discussion of the requirements for several exemptions under the FLSA (i.e., executive, administrative, and professional employees – including computer professionals, and outside salespersons).