The U.S. Department of Labor issued four new opinion letters on January 19, 2021:
A trade association of staffing firms asked for an opinion on whether the Fair Labor Standards Act’s (FLSA) “retail or service establishment” exemption applies to staffing firms that recruit, hire, and place employees on temporary assignments with clients.
Qualifying for the exemption would mean there is no overtime requirement under the FLSA. But the exemption only applies to an employee (1) who works at a retail or service establishment, (2) whose regular rate of pay exceeds one and one half times the minimum wage, and (3) whose earnings are more than half commissions in a representative period. Therefore, the answer is unlikely to affect hourly temps assigned to work for staffing firm clients, but it could affect staffing company employees engaged in recruiting, sales, and other internal business functions.
The focus was on the first requirement, and whether a staffing firm may qualify as a “retail or service establishment.” To qualify, a business must (1) engage in the making of sales of goods or services, and (2) 75% of its sales of goods or services, or both, must be recognized as retail in the particular industry, and (3) not over 25% of its sales of goods or services, or both, may be sales for resale. 29 C.F.R. § 779.313.
The Labor Department easily concluded that staffing firms are generally engaged in the making of sales of goods or services, notwithstanding that the sales of services are to commercial entities. The second criterion addressing the source of 75% of sales is aimed at whether the establishment has a “retail concept.” Until last year, staffing firms, by regulation, explicitly could not qualify as a “retail or service establishment,” because they lacked a “retail concept.” This regulation was withdrawn on May 20, 2020. After listing the indicia of a “retail concept,” the Labor Department found that “a typical staffing firm may have a ‘retail concept,’ and its sales of recruitment and staffing services may be properly recognized as retail by the staffing industry.” The Labor Department also found the third requirement for exemption was met based on the representation that typical staffing firm sales are not for resale by firm clients and would not amount to 25% of sales.
Therefore, generally, a staffing firm will qualify for the “retail or service establishment” exemption. Whether a specific employee is entitled to overtime, however, still depends on whether the employee is paid at least one and one half times the minimum wage and earns more than half of their compensation through commissions.
The Labor Department also opined that journalists working in small markets qualify for the professional exemption to the FLSA’s minimum wage and overtime requirements if their duties extend beyond mere collecting, organizing, or recording information.
This opinion was requested by several employers in the print, broadcast, and digital media industries throughout the United States. The employers explained that technological advances have changed the way news is gathered, packaged and reported, resulting in a large change in the job duties of journalists — even small outlet journalists. They also explained that employers in all markets look for specialized education in journalism and focus on “context-based” reporting. Rather than the “just the facts” approach of the past, today’s news prioritizes substantive analysis and commentary in the stories reported.
The FLSA exempts those employed in a bona fide executive, administrative, or professional capacity from minimum wage and overtime requirements. Creative professionals, which by regulation may include journalists, qualify for the exemption. But not all journalists qualify. Merely collecting, organizing, and recording information that is routine or already public does not make a journalist exempt. So, for example, rewriting press releases from national agencies usually would not be enough. On the other hand, duties such as performing on the air in radio, television or other electronic media; conducting investigative interviews; analyzing or interpreting public events; writing editorials, opinion columns, or other commentary; or acting as a narrator or commentator can make a journalist exempt.
The Department of Labor concluded that the changes described by the employers in their request for an opinion meant that journalism today required significantly more autonomy, independence, and originality than in the past, and for purposes of the opinion accepted the representation that this shift has affected the primary job duties of some journalists for local or small circulation news outlets. The Labor Department wrote that the creative professional exemption was not limited to national or major market journalists. Primary job duties, not the size, prestige, or geographic reach of the journalist’s employer, was the determining factor.
In this request, the Department of Labor was asked whether certain owner-operators of tractor-trailers were employees or contractors of a transportation company.
The difference between an employee and independent contractor status depends on the concept of economic independence. To determine whether a worker is economically independent from the employer, the Labor Department explained it applies a five-factor test derived from Supreme Court precedent, which is further explained in regulations effective March 8, 2021:
- The nature and degree of control over work;
- The worker’s opportunity for profit or loss based on initiative or investment;
- The amount of skill required for the work;
- The degree of permanence of the worker’s relationship with the potential employer; and
- Whether the work is part of an integrated unit of production.
The Department of Labor explained the first two factors are most probative of the worker’s status as employee or independent contractor. It also wrote that the parties’ actual practice is more relevant than what may be written in a contract. Regarding the elements of control, the Department of Labor wrote that requirements to comply with specific legal obligations, satisfy health and safety standards, carry insurance, or to meet contractual deadlines or quality standards, does not constitute control or make an individual more or less likely to be an employee.
One question was whether requiring a driver to install safety equipment, including censors, monitors, cameras and a speed limiter, and requiring attendance at certain meetings and training activities, were indicative of employee status. The Department of Labor said these measures were intended legal, health, and safety standards and do not suggest control indicative of employee status. The employer also asked the Labor Department to apply the new five-factor test to a variety of factual scenarios, but I will not address that analysis here. A link is provided to the opinion letter for those interested in those details. In a fourth opinion letter issued on January 20, the Labor Department applied the five-factor test to certain distributors of perishable food products. FLSA2021-8.