On May 18, 2020, the U.S. Department of Labor announced a final rule to withdraw the partial lists of establishments that lack or may have a “retail concept” under the Fair Labor Standards Act.

Section 7(i) of the Fair Labor Standards Act (FLSA) provides an exemption from the FLSA’s overtime compensation requirement for certain commissioned employees employed by a retail or service establishment. The final rule withdraws from 29 CFR Part 779:

  1. The “partial list of establishments” that the Department previously viewed as having “no retail concept” and categorically unable to qualify as retail or service establishments eligible to claim the 7(i) exemption; and
  2. The “partial list of establishments” that, in the Department’s view, “may be recognized as retail” for purposes of the exemption.

Withdrawing these lists promotes consistent treatment when evaluating Section 7(i) claims by treating all establishments equally under the same standards and permits the reevaluation of an industry’s retail nature as developments progress over time. This withdrawal will also reduce confusion, as the partial list of establishments that “may be recognized as retail” did not necessarily affect the analysis as to whether any particular establishment was, in fact, retail.

This final rule:

  • Withdraws two provisions from the Department’s regulations, 29 CFR 779.317 and 29 CFR 779.320, which list industries that, in the Department’s view, lack or may have a “retail concept” and are therefore either categorically ineligible or potentially eligible to claim the Section 7(i) exemption.
  • Means that establishments that were on the non-retail list may now assert that they have a retail concept, and establishments that were on the “may be” retail list may continue to assert that they have a retail concept.
  • Promotes consistent treatment of all establishments and reduces confusion for purposes of the Section 7(i) exemption. Moving forward, the Department will apply the same 29 CFR Part 779 analysis to all establishments to determine whether an establishment has a retail concept and otherwise qualifies as a retail or service establishment.

This action is intended to provide clarity to the regulated community as they evaluate the Section 7(i) exemption.

Additional Information