Employee misclassifications have been a hot topic lately, with business after business getting in trouble for failing to pay their workers overtime. With the U.S. Department of Labor cracking down on overtime violations, the threat of lawsuits looms closer than ever. It's important that employees are paid correctly for their time and attendance in accordance with the provisions in the Fair Labor Standards Act (FLSA), but in some cases a company may be unclear on whether a worker is exempt or not.

One case in which a worker may be exempt from receiving overtime is when he/she works in the retail or service industry. However, there are a few conditions that must be met first. Employees looking to use this exemption should ask themselves these three questions:

1) Is 75% of your annual dollar volume of sales not for resale, and recognized as retail sales or services in your industry? (This is to determine initially whether your business qualifies as a retail or service establishment.)

2) Is the employee's regular pay rate more than one and a half times the minimum wage?

3) Do more than half of the worker's total earnings in a given period consist of commissions?

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