Travel Agencies Explore Overtime Rule's Retail Exemption

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By Chris Opfer

March 24 — A group of travel agencies is fighting the Labor Department's new overtime rule in part by asking Congress to take another look at a relatively obscure exemption to federal time-and-a-half pay law that appears to be in limbo.

Representatives from the American Society of Travel Agents say they didn't even know that many of their members may be required to pay overtime until they started looking into the Department of Labor's proposal (RIN 1235-AA11) to expand wage and hour requirements. Although the Fair Labor Standards Act exempts from overtime obligations some retail establishments in which workers earn commissions, it turns out that the Labor Department barred travel agencies and a slew of other businesses from using that safe harbor nearly 46 years ago.

The ASTA is asking Congress to take another look at the exemption, armed with at least one court ruling in which a judge said the DOL appeared to have acted arbitrarily in excluding travel agencies. Their fight to broaden the exemption could be a sign of things to come as businesses grapple with the new regulation , which is expected to make another 5 million workers eligible for overtime pay.

“When the overtime threshold was 20-some thousand, it was not a big issue,” Eben Peck, a senior vice president at the ASTA, told Bloomberg BNA March 17. “But it’s about to become a huge issue.”

The DOL is expected in the coming months to publish a final version of the overtime regulation. The proposed rule would expand overtime eligibility by more than doubling the salary threshold at which workers are automatically entitled to time-and-a-half pay for all hours worked beyond 40 each week.

“The anticipated changes have raised the profile of the exemption issue at a lot businesses,” Seyfarth Shaw partner Alexander Passantino told Bloomberg BNA March 25. “There are going to be a lot of HR folks and operations people who sit down and say ‘now how come we aren't paying this group overtime?'”

Court Challenges Possible

Peck said he and his colleagues were “stunned” to learn that travel agencies might not be covered by the exemption, which applies to workers in retail and service sectors who make at least half of their money from commissions each week. About 42 percent of workers at ASTA member agencies earn some or all of their pay through commissions, according to the organization.

Peck said the group didn't know about a DOL regulation (29 C.F.R. §779.317) issued in 1970—nine years after the exemption became law—listing a wide range of businesses that the DOL says are ineligible because they don't have a “retail concept.” Travel agencies, dry cleaners, gambling establishments, school supply distributors and truck stop operators are among the smatter of businesses barred from the exemption.

Two former DOL wage and hour chiefs in the George W. Bush administration—Passantino and Jackson Lewis attorney Paul DeCamp—told Bloomberg BNA that they're not surprised that some businesses may be in the dark about limits to the retail exemption.

“What I am surprised by is that more businesses have not challenged the DOL regulation from 1970,” DeCamp said March 25. “What we've seen the courts say is that this list just seems to be pulled out of thin air, and this list is not something we're going to give any weight or deference to.”

That includes the U.S. District Court for the Middle District of Florida, which in 1997 ruled that a cruise booking agency was exempt from overtime pay requirements as a retail and commission business (, No. 95-660-CIV-ORL-19 (M.D. Fla. 1997)). The judge in that case—which the Labor Department cited favorably in a 2003 opinion letter—said the DOL's list of non-retail businesses appeared to be “arbitrary and without any rational basis explained in the regulations.”

A Labor Department spokesman told Bloomberg BNA March 25 that the DOL's Wage & Hour Division “still relies” on the regulation for determining whether businesses are covered by the retail exemption.

The DOL didn't go through the full notice and comment rulemaking process before enacting the regulation because the department said the rule was interpretive. That means courts don't have to give it as much deference as they might other regulations, DeCamp said.

The travel agency group is currently focusing its efforts on Congress, where Peck said the ASTA wants to educate members about the exemption issue. It's also not ruling out legal action.

“We certainly made our members aware of this issue with the blacklist,” ASTA general counsel Peter Lobasso told Bloomberg BNA March 17. “We’ve alerted them that we do wish to take some action to challenge this, but—until such time that we get it overturned—we’re going to have to presume that they are in fact going to be ineligible for the exemption.”

To contact the reporter on this story: Chris Opfer in Washington at copfer@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com