Do you have employees who work overtime? Better know the FLSA!

october 24, 2018

Employees for construction companies are not exempt from the service establishment exemption from overtime compensation.

The Fair Labor Standards Act (FLSA) 29 U.S.C. 207 requires that employees must be paid time and a half for all hours worked in excess of forty (40) hours in any given work week. Subsection (i) of section 207 provides that any no employer who employs an employee at a "retail or service establishment" shall be deemed to have violated the provisions of the FLSA with respect to overtime compensation if 1) the "regular rate" of pay of the employee is in excess of one and one half times the minimum hourly rate applicable to the employee under section 206 and 2) more than half of the employee's compensation for a representative period (not less than one month) represents commissions on goods and services.

For purposes of whether an employee is exempt under section 207, while an employee of a building contractor may earn more than one and one half times the minimum wage and may earn more than one half of their compensation from commission sales, that employee will not be considered exempt from the over time wage requirements pursuant to 207(i) because building contractors are not considered a retail or service establishment which is required in order for commission sales exemption to apply. In this regard, 29 CFR 779.317 provides a partial list of establishments lacking "retail concept"so as to come within the the requirements of section 207(i). Included in those establishments are building contractors and construction contractors. Because building/construction contractors are not considered service establishments under section 207(i), the employee who makes more than have their compensation from commission sales is still entitled to be paid time and one half for any hours worked over forty (40).

What do you do with this information: 1) unless you know the rules of the FLSA or have been advised by an employment lawyer on a particular issue, don't assume you know the rules; 2) have a firm grip on how much your employees are working, especially whether they are working more than forty (40) hours per week; 3) keep accurate time records which include hours worked by week and day, including how many hours were worked in each day; 43) unless you have been advised by an employment lawyer that an employee in a construction business is exempt from the overtime requirements of the FLSA, then you must assume that employee is entitled to over time compensation for any time worked in excess of forty (40) hours in any given week.