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on which the Act requires the statutory compensation due for the pay period to be paid, what effect the employee's earnings for such future workweeks would have on his exemption.
Section 779.423 – REPRESENTATIVE
CHARACTER OF PAST PERIODS
may be. The quarterly recomputation would tend to ensure that the period used reflects any gradual changes in the characteristics of the employment which could be important in determining the ratio between compensation representing commissions and other compensation in the current employment situation of the employee.
(b) Ordinarily a period less recent than the periods described in paragraph (a) of this section cannot qualify as a representative period for purposes of the section 7(h) exemption. While there may be circumstances in which it may be necessary to use a corresponding period in the preceding calendar or fiscal year as a representative period for an employee whose compensation representing commissions cannot, because of unusual circumstances, be tested by a more recent period, this would be an exception to the general rule which could be justified only in a factual situation clearly demonstrating the representative character of the period chosen. Whether the facts are adequate to support the choice of such a period as representative within the meaning of the statute in any given case can be determined only by a careful review of all relevant aspects of the particular employment situation in that case.
(a) Generally, where application of the exemption requires consideration of past compensation for the employment, a past employment period as close in time to the workweeks ending in the pay period as can practicably be adopted must be chosen as the representative period. For the reasons previously stated, any past period so chosen should be one which is as representative as possible to those factors in the terms, conditions, and circumstances of employment which may affect the presence or absence of a preponderance of compensation representing commissions in the total compensation of the employee under his present employment situation. To this end the period must be as recent a period, of sufficient length (see $ 779.424) to fully and fairly reflect all such factors, as can practicably be used. Thus, as a general rule, if a month is long enough to reflect the necessary factors, the most recent month for which necessary computations can be made prior to the pay day for the first workweek in the current month should be chosen. Similarly, if it is necessary to use a period as long as a calendar or fiscal quarter year to fully represent such factors, the quarterly period used should ordinarily be the one ending immediately prior to the quarter in which the current workweek falls. If a period longer than a quarter year is required in order to include all the factors necessary to make it fully and fairly representative of the current period of employment for purposes of section 7(h), the end of such period should likewise be at least as recent as the end of the quarter year immediately preceding the quarter in which the current workweek falls. Thus, in the case of a representative period of six months or of one year, recomputation each quarter would be required so as to include in it the most recent two quarter-years for four quarter-years, as the case
Section 779.424-LENGTH OF REPRE
(a) The representative period for determining whether more than half of an employee's compensation represents commissions cannot, under the express terms of section 7(h), be less than one month. The period chosen should be long enough to stabilize the measure of the balance between the portions of the employee's compensation which respectively represent commissions and other earnings, against purely seasonal or plainly temporary changes. Although the Act sets no upper limit on the length of the period, the statutory intent would not appear to be served by any recognition of a period in excess of one year as representative for purposes of this exemption. There would seem to be no employment situation in a retail or service establishment in which
a period longer than a year would be needed tions of exemption expressed in clause 7(h) (2) to represent the seasonal and other fluctuations regardless of the length of the period from & in commission compensation which are referred month to a year which may be chosen as repreto in 88 779.420 and 779.421. Moreover, the in sentative, as, for example, employees compenclusion in the period used under section 7(h) sated exclusively by commissions (without of any past weeks of employment more than advances, draws or guarantees), any such repone year prior to the beginning of the current resentative period designated by the employer quarter year would cause the period to reflect which otherwise meets the conditions mentioned conditions too remote from the present to justify in $ 779.424 will be acceptable as a representaacceptance of the period as truly representative tive period for determining the application of of the employee's earning pattern in his cur the exemption. rent employment situation. Subject to the above minimum and maximum limitations, and Section 779.426_APPLICATION OF THE to the principles discussed in 88 779.420 through
REPRESENTATIVE PERIOD 779.423, a period of any length suitable for a full and fair representation of the pertinent
As previously indicated, the representative compensation characteristics of the employee's
period which must be applied in determining present employment will be accepted as a rep whether an individual employee is exempt from resentative period for purposes of section 7(h) overtime pay pursuant to the provisions of secwhen properly designated and supported in the
tion 7(h) is one which is representative of that employer's records as required by Part 516 of particular employee's earning pattern as it rethis chapter (see also $ 779.430).
lates to the proportionate part of his total compensation which represents commissions. .
Accordingly, for each employee whose exempSection 779.425-LENGTH OF PERIODS
tion is to be tested in any workweek under IN SOME TYPICAL SITUATIONS
clause (2) of section 7(h), an appropriate rep(a) Subject to the conditions mentioned in resentative period or a formula for establishing $ 779.424, in employments where it is typical for such a period must be chosen and must be desigthe employee's commissions to fluctuate upward nated and substantiated in the employer's recor downward in particular weeks, or from sea ords (sep $ 516.28 of this chapter). When the son to season, in accordance with the factors facts change so that the designated period or referred to in 779.421, the period will be con the period established by the designated forsidered representative if it includes a sufficient mula is no longer representative, a new reprenumber of workweeks to reflect such fluctuations sentative period or formula therefor must be throughout their full cycle, and is not longer adopted which is appropriate and sufficient for than is necessary for this purpose.
the purpose, and designated and substantiated (b) In employments where there is no ap in the employer's records. Although the pepreciable fluctuation, from pay period to pay riod selected and designated must be one which period or from commission computation period is representative with respect to the particular to commission computation period, in the pro employee for whom exemption is sought, and portion of the employee's compensation which the appropriateness of the representative period represents commissions, the designation and use for that employee will always depend on his of such a pay period or commission computation individual earning pattern, there may be situaperiod as a representative period for such an tions in which the factors affecting the proporemployee will be proper under section 7(h), tionate relationship between total compensation when such period is not less than one month and and compensation representing commissions otherwise satisfies the conditions mentioned in will be substantially identical for a group or $ 779.424.
groups of employees in a particular occupation (c) With respect to employees whose com or department of a retail or service establishpensation arrangements would meet the condi ment or in the establishment as a whole.
Where this can be demonstrated to be a fact, and is substantiated by pertinent information in the employer's records the same, representative period or formula for establishing such a period may properly be used for each of the similarly situated employees in the group. Whether used for one or more employees, however, there are, as previously indicated, certain time limitations on the use of any fixed period as representative of the compensation characteristics of an employee's employment in later workweeks. These limitations are generally met, however, if a representative period of one specific quarter year or more is not applied to computations under section 7(h) for more than the workweeks in the one following quarter, and if a specific representative period of less than one quarter year but not less than one month is not applied in computations for more workweeks than are included in a following period of the same length.
terly period may be used during the first month of the current quarter; and the quarter-year immediately preceding the current quarter will then be used for all workweeks ending in a quarter-year period which begins one month after the commencement of the current quarter. Thus, a January 1-March 31 representative period may be used for purposes of section 7(h) in a quarterly period beginning May 1 and ending July 31, allowing the month of April for necessary commission computations for the representative period. Once this method of computation is adopted it must be used for each successive period in like manner. The prior period used as representative must, of course, as in other cases, meet all the requirements of a representative period as previously explained.
Section 779.428DEPENDENCE OF THE SECTION 7(h) OVERTIME PAY EXEMPTION UPON THE LEVEL OF THE EMPLOYEE'S “REGULAR RATE” OF PAY
Section 779.427—GRACE PERIOD FOR COMPUTING PORTION OF COMPENSATION REPRESENTING COMMISSIONS
Where it is not practicably possible for the employer to compute the commission earnings of the employee for all workweeks ending in a prior representative period in time to determine the overtime pay obligations, if any, for the workweek or workweeks immediately following, one month of grace may be used by the retail or service establishment. This month of grace will not change the length of the current period in which the prior period is used as representative. It will merely allow an interval of one month between the end of the prior period and the beginning of the current period in order to permit necessary computations for the prior period to be made. For example, assume that the representative period used is the quarter-year immediately preceding the current quarter, and commissions for the prior period cannot be computed in time to determine the overtime pay obligations for the workweeks included in the first pay period in the current quarter. By applying a month of grace, the next earlier quar
If more than half of the compensation of an employee of a retail or service establishment for a representative period as previously explained represents commissions on goods or services, one additional condition must be met in order for the employee to be exempt under section 7(h) from the overtime pay requirement of section 7(a) of the Act in a workweek when his hours of work exceed the maximum number specified in section 7(a). This additional condition is that his "regular rate” of pay for such workweek must be more than one and one-half times the minimum hourly rate applicable to him under the minimum wage provisions of section 6 of the Act. If it is not more than one and one-half times such minimum rate, there is no overtime pay exemption for the employee in that particular workweek.
Section 779.429—COMPUTING THE "REG
ULAR RATE” OF PAY FOR PURPOSES OF SECTION 7(h)
The meaning of the "regular rate” of pay under the Act is well established. As explained by the Supreme Court of the United
States, it is "the hourly rate actually paid the employee's compensation attributable to such employee for the normal, nonovertime work hours. The hourly rate thus obtained must be week for which he is employed” and “by its
compared with the applicable minimum rate very nature must reflect all payments which
of pay of the particular employee under the the parties have agreed shall be received regu
provisions of section 6 of the Act. If the larly during the workweek, exclusive of over
latter rate is $1.00 an hour, for example, time payments." (Walling v. YoungermanReynolds Hardwood Co., 325 U.S. 419.) It is
then the employee's regular rate must be more
than $1.50 an hour if the exemption is to apply. a rate per hour, computed for the particular workweek by a mathematical computation in which hours worked are divided into straight
Section 779.430--RECORDKEEPING time earnings for such hours to obtain the
REQUIREMENTS statutory regular rate (Overnight Motor Co.
The records which must be kept with respect v. Missel, 316 U.S. 572). By definition (Act,
to employees for whom the overtime pay exsection 7(d)), the "regular rate” as used in section 7 of the Act (of which section 7(h)
emption under section 7(h) is taken are speciwas made a part by the 1961 amendments) in
fied in $ 516.28 of this chapter. As previously cludes "all remuneration paid to, or on behalf
indicated, these include a designation of the of, the employee” except payments expressly
“representative period” chosen, or of a formula excluded by the seven numbered clauses of sec
used to establish such period, together with the tion 7(d). The computation of the regular
information necessary to substantiate the charrate for purposes of the Act is explained in
acter of such a period as a “representative” one Part 778 of this chapter. The "regular rate"
for the statutory purpose. Other information is not synonymous with the “basic rate” which pertinent to the application of the exemption may be established by agreement or under
must also be kept in the records, including the standing of the parties to the employment
"regular rate” of pay of the employee in each
workweek. agreement under the provisions of section 7(f) (3) of the Act; that section, like section
Section 779.431-BASIC RATE FOR COM. 7(h), merely provides an exemption from the
PUTING OVERTIME COMPENSATION general requirement of overtime compensation
OF NON-EXEMPT EMPLOYEES REbased on the regular rate contained in section
CEIVING COMMISSIONS 7(a), if certain prescribed conditions are met (in section 7(f) (3) these include payment of The overtime compensation due employees of overtime compensation on a basic rate estab a retail or service establishment who do not lished and authorized in accordance with its meet the exemption requirements of section terms). The requirement of section 7(h) with 7(h) may be computed under the provisions of respect to the "regular rate” of pay of an em section 7(f) (3) of the Act if the employer and ployee who may come within the exemption employee agree to do so under the conditions which it provides is a simple one: “the regular there provided. Section 7(f) (3) permits the rate of pay of such employee,” when employed use of a basic rate established, pursuant to “for a workweek in excess of the applicable agreement or understanding in advance of the workweek specified” in section 7(a), must be work, in lieu of the regular rate for the pur"in excess of one and one-half times the mini
pose of computing overtime compensation. mum hourly rate applicable to him under sec The use of such a basic rate for employees of tion 6.” The employee's "regular rate” of pay a retail or service establishment compensated must be computed, in accordance with the prin wholly or partly by commissions is authorized ciples discussed above, on the basis of his hours under the conditions set forth in Part 548 of of work in that particular workweek and the
Subpart FĻOTHER PROVISIONS WHICH MAY AFFECT
GENERAL Section 779.500_PURPOSE OF SUBPART
In Subpart A of this part, reference was made to a number of regulations which discuss provisions of the Act, such as general coverage, overtime compensation, joint employment, hours worked, and methods of payment of wages, which are applicable to others as well as to retailers and their employees. (See section 779.6.) In addition to those provisions, the Act contains other provisions of interest to retailers and their employees. It is the purpose of this subpart to focus attention on several provisions in the latter category.
CHILD LABOR PROVISIONS
(b) The Secretary of Labor, or any of his authorized representatives, shall make all investigations and inspections under section 11(a) with respect to the employment of minors, and, subject to the direction and control of the Attorney General, shall bring all actions under section 17 to enjoin any act or practice which is unlawful by reason of the existence of oppressive child labor, and shall administer all other provisions of this Act relating to oppressive child labor.
(c) No employer shall employ any oppressive child labor in commerce or in the production of goods for commerce or in any enterprise engaged in commerce or in the production of goods for commerce.
Section 779.501-CHILD LABOR PROVI.
SIONS IN 29 CFR 4.101-4.129
Sections 4.10144.129 in Subtitle A of this title contain a detailed discussion of the child labor provisions of the Act. Although those sections offer guidance for all including retailers, the brief discussion in sections 779.502 through 779.508 are of particular interest to those in the retail field.
PROVISIONS Child labor provisions:
Sec. 12. (a) No producer, manufacturer, or dealer shall ship or deliver for shipment in commerce any goods produced in an establishment situated in the United States in or about which within thirty days prior to the removal of such goods therefrom any oppressive child labor has been employed : Provided, That any such shipment or delivery for shipment of such goods by a purchaser who acquired them in good faith in reliance on written assurance from the producer, manufacturer, or dealer that the goods were produced in compliance with the requirements of this section, and who acquired such goods for value without notice of any such violation, shall not be deemed prohibited by this subsection; And provided further, That a prosecution and conviction of a defendant for the shipment or delivery for shipment of any goods under the conditions herein prohibited shall be a bar to any further prosecution against the same defendant for shipments or deliveries for shipment of any such goods before the beginning of said prosecution.
Section 779.503—THE RETAILER AND
SECTION 12(a) Section 12(a) prohibits certain shipments or deliveries for shipment by “producers," “manufacturers" or "dealers." These terms having appeared in this section prior to the 1961 amendments are defined and described in section 4.105 of this title, and said definitions remain unchanged. It should be noted that the term "manufacturer” as used in section 12(a) includes retailers who, in addition to retail selling, engage in such manufacturing activities as the making of slipcovers or curtains, the baking of bread, the making of candy, or the making of window frames. Further, the term "dealers" refers to anyone who deals in goods including persons engaged in buying, selling, trading, distributing, delivering, etc. “Dealers,” therefore, as used in section 12(a) includes retailers. Therefore, where a retailer's business unit is covered under the Act and he is a producer, manufacturer or dealer within the meaning of this section, the retailer must comply with the requirements of section 12(a). If a retailer's business unit which is covered under the Act is exempt as a retail or service establishment under section 13 of the Act from the monetary requirements of the Act, the requirements of the child labor provisions must still be met. For example, establishments such as hotels, restaurants, etc., in covered enterprises, and retail or service establishments in covered enterprises doing less than $250,000 annually, must comply with the child labor requirements even if they are exempt from minimum wage and overtime provisions under section 13(a) (2) of the Act.