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New FLSA Exemptions: Changes That May Affect Your Staffing Firm in 2021

February 17, 2021 - minute read

It will likely come as no surprise that over the past two decades, lawsuits under the Fair Labor Standards Act (FLSA) have increased by more than 200%. This is largely due to the FLSA’s extensive and easily misinterpreted contents, which often leads employers’ compliance efforts astray.

After much criticism on the broad nature of the FLSA’s various protections, the Department of Labor (DOL) has revisited its previous FLSA interpretations and released another Opinion Letter (FLSA2021-6) concerning overtime exemptions. Up until now, the FLSA has made it difficult for many employers to prove than an employee falls within one of the FLSA’s established overtime exemption categories.

Among the details of the Opinion Letter is one that could have a serious impact on staffing firms: temporary staffing firms may qualify as “retail or service establishments”, making them eligible to apply the FLSA’s “retail sales” overtime exemption to certain employees. This means you may be able to earn significant, new exemptions if you employ certain sales or commissioned personnel within your operation.

Given the cost of the ongoing pandemic, your business could probably use some extra exemptions! Let’s discuss these new protections in full and how to fully qualify.

The Journey to Fairer Exemptions

Until Motorcars, LLC. v. Navarro, exemptions under the FLSA made it nearly impossible to avoid paying overtime to unfairly qualified individuals- particularly high-earners or those serving in non-staffing capacities within your business. In the case of this ruling, the Court agreed with employers that construction of the FLSA’s exemptions was improperly done and that the exemptions needed to be more “fairly” interpreted since they are “as much a part of the FLSA’s purpose as the overtime-pay requirement” itself.

Fast forward to last month’s Opinion Letter, staffing agencies are seeing new avenues for exemptions and fairer compliance. Now that you’ve heard the good news, let’s get into what this expanded interpretation means so you can make good use of them.

Qualifying as a “Retail or Service Establishment”

As previously stated, the recent Opinion Letter stated that temporary staffing firms may qualify as “retail or service establishments” and therefore become eligible for the FLSA’s “retail sales” overtime exemption. Before we discuss the conditions for earning any exemption(s), let’s first take a moment to establish that your business passes as a “retail or service establishment.”

Those requirements are as follows:

  • Your organization must be engaged in the making for selling of goods or services. *For staffers, this has been interpreted to mean your company provides “services to businesses in the general public, which may serve the employment needs of your community” and employs temporary workers as ‘end of the stream distribution’, not bulk-placed or members of a manufacturing entity.
  • 75% of your business’s sales for goods or services, or of both, are recognized as retail in the relevant industry.
  • 25% or less of your company’s sales for good or services are sales for resale. The DOL concluded that staffing firms do not usually “resale” temporary workers to customers.

Retail Sales Exemption for Staffing Agencies

Based on the previous items, a staffing firm qualified as a “retail or service establishment” is open to earning exemptions for retail sales.

The retail sales exemption specifies that an employee is exempt from the overtime (but not minimum wage) requirements of the FLSA, so long as the employee:

  • Works at a “retail or service establishment;”
  • Has a regular rate of pay that exceeds one and one-half times the applicable minimum wage; and
  • Has earnings in a representative period that is composed of more than fifty percent commissions. *Remember, employees who qualify for the retail sales exemption do not need to be paid on a salary basis.

Some additional elements to keep in mind: staffing businesses that serve primarily as secondary suppliers may not necessarily fall within DOL’s conclusion. This most recent Opinion Letter only applies to the FLSA, so state laws may not have the same allowances either.

Need Additional Compliance Help?

If your staffing business has employees that qualify for the retail sales exemption, you’ll still need to record their hours so you can prove their regular rates of pay exceeds one and one-half times the minimum wage. Workforce management software is a huge asset for accomplishing such a task with ease and accuracy.

EPAY System’s time and labor system features built-in compliance safeguards that help employers avoid violations, fines, lawsuits, and settlements. From maintaining detailed overtime records… to providing you with access to our 24/7 compliance portal… See what a top-tier Human Capital Management (HCM) system can do for your hourly workforce. Safeguard your compliance, and sign up for a demo today.

Filed Under: Staffing overtime FLSA