(5) Sales of servicing and repair work performed under a fleet maintenance arrangement on trucks and other automotive vehicles whereby the establishment undertakes to maintain a customer's fleet at a price below the prevailing retail prices.

(c) Farm implement sales. All sales of farm machinery, such as equipment necessary for plowing, planting, thinning, weeding, fertilizing, irrigating, and harvesting of crops, and raising of livestock on the farm, and the repair work thereon, will be considered as retail (whether sold to farmers or nonfarmers) except the following:

(1) Sales for resale: For example, sales of machinery, parts, accessories or services to service stations, repair shops and other dealers, where these establishments resell these items or where they use them in repairing customers' farm implements, are sales for resale. However, this does not apply to transfers of such items between departments within the dealer's establishment. Thus, transfers of parts from the parts department to the service department of a farm implement dealer's establishment will not be considered sales for resale. Such transfers from one department to another will be disregarded in computing the establishment's sales for determining the applicability of this exemption. So also accommodation transfers of farm implements between dealers will be disregarded in computing the establishment's sales for purposes of this exemption. Accommodation transfers refer to occasional exchanges or transfers of farm implements between dealers and not to situations where a dealer supplies farm implements to other dealers as part of what may be described as a distribution system.

(2) Sales made pursuant to formal invitation to bid. Such sales are made under a procedure involving the issuance by the buyer of a formal invitation to bid certain merchandise for delivery in accordance with prescribed terms and specifications. Sales to Federal, State and local governments are typically made in this manner.

(3) Sales of specialized equipment not ordinarily used by farmers, such as:

Bulldozers.
Scrapers.

Land levelers.
Graders.

Cotton ginning machinery. Canning and packing equipient. (4) Sales of junk.

(5) Sales of machinery or equipment which are sold "installed", where the installation involves construction work. Installations which require extensive planning, labor and use of specialized equipment ordinarily constitute construction work. In such cases the cost of installation ordinarily is substantial in relation to the cost of the goods installed.

(d) It should be noted that the concept of fleet sales discussed in paragraph (b) of this section does not apply to sales to farmers, even though the farmer uses five or more vehicles on his farm. Further, any receipts derived from warehousing, water well drilling or manufacturing activities performed by the dealer are not receipts from retail sales. These activities and the manufacturing of farm implements are not retail activities.

Section 779.398-"PRIMARILY ENGAGED"

This exemption, by its term, applies only to those establishments which are primarily engaged in the business of selling automobiles, trucks, or farm implements. Establishments such as auto rental establishments, garages, repair shops, which are not "primarily” engaged in such business, but which may sell some automobiles, trucks or farm implements only as an incident to their principal activities, are not within this exemption. Whether an establishment is "primarily" engaged in the business of selling automobiles, trucks, or farm implements depends on all the facts. For administrative purposes an establishment will be regarded as primarily engaged in such business if more than 50 percent of the establishment's annual dollar volume of sales is derived from the sales of automobiles, trucks or farm implements.

GENERAL PRINCIPLES

EXECUTIVE, ADMINISTRATIVE

AND PROFESSIONAL EM-
PLOYEES AND OUTSIDE
SALESMEN

Section 779.402-STATUTORY PROVISION

Section 13 (a) (1) of the Act provides that the provisions of sections 6 and 7 shall not apply with respect to:

Any employee employed in a bona fide executive, administrative, or professional capacity, or in a capacity of outside salesman (as such terms are defined and delimited from time to time by regulations of the Secretary, subject to the provisions of the Administrative Procedure Act, except that an employee of a retail or service establishment shall not be excluded from the definition of employee employed in a bona fide executive or administrative capacity because of the number of hours in his workweek which he devotes to activities not directly or closely related to the performance of executive or administrative activities, if less than 40 per centum of his hours worked in the workweek are devoted to such activities).

The terms "executive" and "administrative" as used in section 13 (a) (1) have appeared therein prior to the 1961 amendments and have been defined and delimited in Subpart A of Part 541 of this chapter and explained in Subpart B of that part. These regulations are applicable under the amended section 13(a)(1) in determining which employees are bona fide executive or administrative employees. The amended provision does, however, liberalize, in one respect, the pre-1961 regulations as they pertain to executive and administrative employees of retail or service establishments. That is, an executive or administrative employee of a retail or service establishment may devote up to 40 percent of his hours worked in a workweek to activities which are not directly and closely related to the performance of executive or administrative activities and still qualify. as a bona fide executive or administrative employee, whereas, in any other type of establishment such a tolerance is limited to 20 percent, Part 541 of this chapter except where special provisions are made in those regulations. Section 779.404-ADMINISTRATIVE AND EXECUTIVE EMPLOYEES IN 3(s) (1) OR 3(s) (5) ENTERPRISES EMPLOYED IN OTHER THAN RETAIL OR SERVICE ESTABLISHMENTS

The 40 percent tolerance for non-executive or non-administrative duties discussed in the preceding section, does not apply to executive or administrative employees of an establishment other than a "retail or service establishment". For example, an executive or administrative employee of a central office or a central warehouse of a chain store system is not an employee of a "retail or service establishment," and therefore must still devote not more than 20 percent of his hours worked in a workweek to activities which are not directly and closely related to the performance of executive or administrative duties in order to qualify as a

bona fide executive or administrative employee under section 13(a)(1), except where special provisions are made in the regulations issued under that section of the Act.

Section 779.405-OTHER SECTION 13(a) (1) EMPLOYEES EMPLOYED IN COVERED ENTERPRISES

The "professional" employee or the "outside salesman" employed by a retail or service establishment in a covered 3 (s) (1) or 3 (s) (5) enterprise in order to qualify as a bona fide "professional employee" or an "outside salesman" must meet all the requirements set forth in the regulations issued and found in Part 541, Subpart A of this chapter, and further explained in Subpart B thereof. The 40 percent tolerance discussed in section 779.404 for "administrative and executive employees" of a retail or service establishment does not apply to the "professional employee" or the "outside salesman."

STUDENT-LEARNERS AND
HANDICAPPED WORKERS

Section 779.406-STATUTORY
PROVISIONS

Section 13(a) (7) of the Act provides that the provisions of sections 6 and 7 shall not apply to: Any employee to the extent that such employee is exempted by regulations or orders of the Secretary issued under section 14.

Section 14 of the Act provides that:

The Secretary of Labor, to the extent necessary in order to prevent curtailment of opportunities for employment, shall by regulations or by orders provide for (1) the employment of learners, of apprentices, of messengers employed primarily in delivering letters and messages, and of full-time students outside of their school hours in any retail or service establishment: Provided, That such employment is not of the type ordinarily given to a full-time employee, under special certificates issued pursuant to regulations of the Secretary, at such wages lower than the minimum wage applicable under section 6 and subject to such limitations as to time, number, proportion, and length of service as the Secretary shall prescribe, and (2) the employment of individuals whose earning capacity is impaired by age or physical or mental deficiency or injury, under special certificates issued by the Secretary, at such wages lower than the minimum wage applicable under section 6 and for such period as shall be fixed in such certificates.

Section 779.407-"STUDENT-LEARNERS"

(a) Applicable regulations. In accordance with section 14 of the Act regulations have been issued to provide for employment under special certificates of student-learners at wages lower than the minimum wage applicable under section 6 of the Act. These regulations are set forth in Part 520 of this chapter and govern the issuance of special certificates for student-learners in covered employments generally as well as such employments in retail or service establishments.

(b) Definitions. The regulation in section 520.2 of this chapter define "student-learners" and "bona fide vocational training program" as follows:

(1) A "student-learner" is defined as "a student who is receiving instruction in an accredited school, college or university and who is employed on a part-time basis, pursuant to a bona fide vocational training program."

(2) A "bona fide vocational training program" is defined as "one authorized and approved by a State board of vocational education or other recognized educational body and provides for part-time employment training which may be scheduled for a part of the work day or workweek, for alternating weeks or for other limited periods during the year, supplemented by and integrated with a definitely organized plan of instruction designed to teach technical knowledge and related industrial information given as a regular part of the student-learner's course by an accredited school, college or university."

Section 779.408-LEARNERS OTHER
THAN "STUDENT-LEARNERS"

Regulations have been issued in accordance with the authority in section 14 of the Act to provide for employment under special certificates of learners at wages lower than the minimum wage applicable under section 6 of the Act. Regulations for learners in the retail industry will be issued and promulgated in the FEDERAL REGISTER. General learner regulations are set forth in sections 522.1 to 522.11, of this chapter.

Section 779.414-METHODS OF COMPENSATION OF RETAIL STORE EMPLOYEES

Retail or service establishment employees are generally compensated (apart from any extra payments for overtime or other additional payments) by one of the following methods:

(a) Straight salary or hourly rate. Under this method of compensation the employee receives a stipulated sum paid weekly, bi-weekly, semi-monthly or monthly or a fixed amount for each hour of work.

(b) Salary plus commission. Under this method of compensation the employee receives a commission on all sales in addition to a base salary (see paragraph (a) of this section).

(c) Quota bonus. This method of compensation is similar to paragraph (b) of this section except that the commission payment is paid on sales over and above a predetermined sales quota.

(d) Straight commission without advances. Under this method of compensation the employee is paid a flat percentage on each dollar of sales he makes.

(e) Straight commission with "advances", "guarantees", or "draws". This method of compensation is similar to paragraph (d) of this section except that the employee is paid a fixed weekly, bi-weekly, semi-monthly, or monthly "advance", "guarantee" or "draw". At periodic intervals a settlement is made at which time the payments already made are supplemented by any additional amount by which his commission earnings exceed the amounts previously paid.

The above listing which reflects the typical methods of compensation is not, of course, exhaustive of the pay practices which may exist in retail or service establishments.

Section 779.415-TYPES OF EMPLOYMENT IN WHICH THIS OVERTIME PAY EXEMPTION MAY APPLY

Section 7(h) 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 socalled "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 that the employees treated as exempt from overtime compensation under section 7 (h) are properly within the statutory exclusion. Section 779.416-COMPENSATION REPRESENTING "COMMISSIONS ON GOODS OR SERVICES"

As explained earlier in this part, a retail or service establishment within the meaning of the Act is a physical place of business engaged in making "sales of goods or services" which meet the prescribed statutory tests. Section 7(h) provides an overtime pay exemption for an employee of such an establishment on the condition, among others, that more than half his compensation over a representative period "represents commissions on goods or services." In so providing, the Congress plainly must have had in mind employees compensated principally on an incentive basis through payments representing commissions on the goods or services in which the retail or service establishment deals, pursuant to the traditional methods of commission compensation (see §§ 779.414, 779.415) used in retail businesses. Although typically in retail or service establishments commission payments are keyed to sales, the requirement of the exemption is that more than half the employee's compensation represent commissions "on goods or services", which would include all types of commissions customarily based on the goods or services which the establishment sells, and not exclusively those measured by "sales" of these goods or services.