Opinion ID: 174859
Heading Depth: 2
Heading Rank: 3

Heading: Department of Labor Interpretations

Text: The Department's regulations specifically elaborate on the purpose of § 7(i): Section 7(i) was enacted to relieve an employer from the obligation of paying overtime compensation to certain employees of a retail or service establishment paid wholly or in greater part on the basis of commissions. These employees are generally employed in so-called big ticket departments and those establishments or parts of establishments where commission methods of payment traditionally have been used, typically those dealing in furniture, bedding and home furnishings, floor covering, draperies, major appliances, musical instruments, radios and television, men's clothing, women's ready to wear, shoes, corsets, home insulation, and various home custom orders. There may be other segments in retailing where the proportionate amount of commission payments would be great enough for employees employed in such segments to come within the exemption. Each such situation will be examined, where exemption is claimed, to make certain the employees treated as exempt from overtime compensation under section 7(i) are properly within the statutory exclusion. 29 C.F.R. § 779.414. Although the Department has not defined commission in its regulations, [3] the Wage and Hour Division of the Department of Labor has attempted to explain the meaning of the term commission under the retail commission exception through various opinion letters. The following three letters are most relevant to our analysis. First, the Department opined that alarm system installers who were compensated based on a percentage of the sales price of the alarm systems they installed were paid a commission. However, installers who were paid a flat fee per installation were not paid a commission and did not fall within the scope of section 7(i). Dep't of Labor Op. Ltr., 1996 WL 1031770 (Apr. 3, 1996). The Department's letter does not elaborate on whether the installers who were paid a percentage of the sales price also had the ability to sell upgrades to alarm systems on-site, thereby increasing their commissions by increasing the cost to the consumer. Put differently, it is unclear from the letter whether these installers can be considered in sales. The Department based its determination of what was a commission solely on the fact that one compensation method was based on a percentage of cost to the consumer and the other was a flat rate with no connection to the cost to the consumer. In a second letter concerning health club instructional employees, the Department was unable to reach an opinion because the employeesmembership sales associates and personal trainersappeared to be compensated under more than one method. Dep't of Labor Op. Ltr., 2005 WL 3308624 (Nov. 14, 2005). The Department did offer the employer the following guidance: Flat fees paid without regard to the value of the service performed do not represent `commissions on goods or services' for purposes of Sec[tion] 7(i). Field Operations Handbook, 21h04(c)... Rather, employees paid a flat fee are considered to be compensated on a piece rate basis and not on the basis of commissions. Commissions, for purposes of Sec[tion] 7(i), usually denotes a percentage of the amount of monies paid out or received. ... Moreover, instructional employees paid a flat fee per lesson or session taught appear likely to earn the same amount each week, contrary to the requirements of 29 C.F.R. § 779.416. Id. In the third letter, concerning automobile detailers and painters, the Department relied on the same above-quoted passage from the Wage and Hour Field Operations Handbook to determine the definition of commission. Dep't of Labor Op. Ltr., 2006 WL 4512957 (June 29, 2006). The detailers and painters in this letter were paid according to how many vehicles they serviced each week. Each vehicle was assigned a predetermined number of flag hours based on the employer's expectation of how long the job would take to complete. Each detailer or painter was assigned a flag rate of pay based on his or her experience and expertise. The detailers and painters were paid by multiplying their flag rate by the flag hours for each vehicle they serviced, regardless of how long it actually took them to complete a job. Under this system, the employees were encouraged to work rapidly and efficiently, and their pay varied from week to week. In its letter, the Department concluded that this payment arrangement was a commission because the amount of the payment appears to be related to the value of the service performed. Id.