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Fair Labor Standards Act (“FLSA”) - page 2 / 8





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Establishment-establishment refers to a “distinct physical place of business” rather than to “an entire business or enterprise” which may include several places of business or establishments. The regulations also state that in the case of an automobile dealership the establishment includes all activities or departments that functionally operate as a part of the dealership or establishment. As an example a recent Department of Labor Opinion Letter described an auto dealership business as three separate establishments. Two separate establishments that sell vehicles predominately to the general public (“Retail”) and another separate establishment that predominately sells vehicles to rental companies and large fleet operators (“Non Retail”).

If an establishment satisfies the two requirements, an exemption from the overtime provisions is available for salesmen, partsmen, and mechanics employed by the establishment. Current regulations exclude from this exemption service managers, service writers or advisors, and service salesmen. However, recently the Department of Labor proposed new regulations to remove the language that excludes these positions from the exemption and specifically includes them in the definition of “salesmen” and therefore make them exempt from overtime provisions. This proposed change is meant to bring the regulations in line with court decisions that have included these additional positions within the exemption. In order for employees to be classified as salesmen, partsmen, or mechanics over fifty percent of their time during a work week must be spent in selling or servicing automobiles.

Salesmen- salesmen are defined as employees that over fifty percent of their time is spent making sales or obtaining orders or contracts for the sale of automobiles. Incidental work including deliveries and collections is included within the definition.

Partsmen- partsmen are defined as employees that over fifty percent of their time is spent requisitioning, stocking, and dispensing automobile parts.

Mechanics-mechanics are defined as employees that over fifty percent of their time is spent performing mechanical repairs or work to automobiles. Non-mechanical repairs or work such as washing, cleaning, painting, polishing, tire changing, installing seat covers, lubricating or dispatching are not included in this exemption.

Other exemptions

Commission Employees of Retail or Service Establishments

An additional exemption from overtime provisions is allowed for certain commission employees of a retail or service establishment. To qualify for this exemption, three requirements must be met as follows:

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