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Fair Labor Standards Act (“FLSA”) - page 1 / 8





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Fair Labor Standards Act (“FLSA”)

Under the FLSA employees generally are entitled to receive an hourly rate or a hourly rate equivalent that is equal to or greater than the federal minimum wage rate and also receive an overtime premium pay of time and one half the regular rate of pay for hours worked in excess of forty (40) hours per week. The FSLA also contains a number of exemptions for the minimum pay and/or overtime requirements. The United States Department of Labor enforces the FSLA and the Department’s Wage and Hour Division is the administrative unit that actually performs this task. Individual states pass labor laws that may differ from the federal FLSA and govern employers operating within the state. Generally the law that is more generous to the employee will determine what is permissible in each state. Additionally, federal courts from different jurisdictions have come to completely opposite conclusions in cases that involve nearly identical issues. As a result wage and hour requirements can be very confusing and hard to follow.

Applicability to Dealerships

Generally, automobile dealerships are subject to the FLSA and state labor laws in the states in which they operate. Specific exemptions for automobile dealerships have been codified in the FLSA and many states have followed suit. The following discussion involves the FLSA. You should review any state requirements that may require a different guideline.

Dealership Specific Issues

A specific exemption exists for certain employees of nonmanufacturing establishments engaged in the business of selling automobiles, trucks, trailers, farm implements, or aircraft. In order for an establishment to qualify for this exemption it must meet two requirements as follows:

1.) The establishment must not be engaged in manufacturing; and 2.) The establishment must be primarily engaged in the business of selling

automobiles, trucks, trailers, farm implements, or aircraft to the ultimate purchaser.

In order to be primarily engaged in the business of selling automobiles (in the case of an automobile dealership) more than fifty percent of the annual volume of sales or business done must come from the sale of automobiles to the ultimate purchaser.

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