Exploring FLSA Section 7(i) — Can You Use it to Exempt Commissioned Employees from Overtime?

A common question we often get asked by our health and country club clients is whether their trainers, tennis and golf professionals, and other similar employees may be considered commissioned employees of “retail or service establishment,” and thus exempt from overtime pay pursuant tgolf-pro-shopo Section 7(i) of the Fair Labor Standards Act (“FLSA”).  The short answer is “probably yes,” but there are certain criteria that must be met to ensure compliance with the FLSA.

By way of background, the FLSA generally requires an employer to pay overtime to any non-exempt employee who works over 40 hours during a workweek.  However, as readers of this blog are likely already aware, certain “white collar” employees, such as executive, administrative, and professional employees, may be exempt from the FLSA’s overtime provisions.  The FLSA also exempts from overtime certain employees who are paid mostly on commissions rather than a salary basis.  Specifically, Section 7(i) of the FLSA creates an overtime exemption that applies when all three of the following conditions are met:

  1. The employee is employed by a retail or service establishment;
  2. The employee’s regular rate of pay exceeds one and one half times the minimum wage for every hour worked in a workweek in which any overtime hours are worked; and
  3. More than half of the employee’s total earnings in a “representative period” (of not less than one month) consists of commissions on goods or services.

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