Retailers should use caution as they enter the important and busy holiday season. The FLSA is an old law but retailers are vulnerable to violations especially during the holiday crunch. And, retailers need to remain attentive as changes may be imminent when President Elect President Barack Obama begins implementing policy changes.

The top five areas to watch are:

  • All hours worked must be paid. Employers and employees are tempted to permit off the clock work. This is especially true in a commission environment. Working off the clock has resulted in multi-million dollar verdicts against many retailers in the past. Employees must be required to clock in for all hours worked and cannot be permitted to clock out and return to the sales floor under any circumstances.
  • Being paid on a commission basis does not mean that overtime is not owed. The FLSA provides an exemption from overtime for retail sales persons provided that: 1) the regular rate of pay of such employee is in excess of one and one-half times the minimum wage; 2) more than half the employee’s compensation for a representative period (which CANNOT be less than one month) is commission for goods sold; and, 3) seventy-five percent of the retailer’s annual dollar volume of sales is not for resale and is recognized as retail in the particular industry. If you have an employee who is paid on commission but does not meet all three prongs of this test, the employee must be paid overtime for all hours worked in excess of 40 hours per week
  • Remember that employees must be paid for attendance at mandatory store meetings. Attendance at meetings, lectures, training programs and similar activities is compensable unless four conditions are met: (1) attendance is outside of regular working hours, (2) attendance is voluntary, (3) the activity is not related to the employee’s job, and (4) no productive work is done during the activity.
  • The Regular Rate calculation includes all compensation paid to an employee. This means that other than discretionary bonuses, in determining the regular rate of pay for calculating overtime, all commissions, bonuses, etc. must be considered. This can result in significant liability if the specific rules are not followed .
  • Meal and rest periods. Remember that while federal law does not require that employees receive meal and rest periods, the FLSA does require that an employee be paid for all breaks where they are subject to being called into work or that last less than 20 minutes. And, many states REQUIRE that meal and rest periods be provided at specific intervals and impose significant penalties for failure to adhere to such rules. Therefore, make sure that management strictly follows meal and rest period requirements under relevant state law.