Retail Industry

The Retail Industry Under the Fair Labor Standards Act (FLSA)

A retail establishment is an establishment 75% of whose annual dollar volume of sales is not for resale and is recognized as retail in the particular industry. Some examples of establishments which may be retail are: automobile repair shops, bowling alleys, gasoline stations, appliance service and repair shops, department stores and restaurants. Some examples of establishments which are not retail are: accounting firms, medical and dental clinics, construction companies, radio and television stations.


Covered, non-exempt employees are entitled to the Federal minimum wage ($7.25 per hour). Overtime pay at a rate not less than one and one-half times the employee's regular rate of pay is required after 40 hours are worked in a workweek.

Certain retail or service employees paid by commissions may be exempt from overtime pay.

The Act requires employers to keep records of wages, hours, and other items, as specified in the recordkeeping regulations.

Typical Problems

Hours Worked: Employers must record and pay for all hours worked by employees including any time controlled by the employer, such as time spent “engaged to wait.” Where employees report to work at their scheduled time, the employer must begin counting that as work time. If the employees are told to wait until they are needed, and are not given a specific report-back time that is long enough to use for their own benefit, all of the waiting time is to be counted as hours worked.

Illegal Deductions: Deductions made from employees’ wages for such items as cash or merchandise shortages, required uniforms, and tools of the trade are not legal to the extent that they reduce the wages below the statutory minimum wage or reduce the amount of overtime pay.

Salaried Employees: A salary, by itself, does not exempt employees from the minimum wage or from overtime. Whether employees are exempt from minimum wage and overtime depends on their job duties and responsibilities as well as the salary paid. Often, in retail businesses, salaried employees do not meet all the requirements specified by the regulations to be considered as exempt from overtime pay. Regulations, 29 CFR Part 541 contain a discussion of the requirements for several exemptions under the FLSA (i.e., executive, administrative, and professional employees -- including computer professionals, and outside sales persons).