Co-authored by Benjamin Briggs and Kevin Young

Last Monday, a cable services subcontractor notched a substantial victory against a class of 146 cable technicians, whose overtime claims a federal court in Georgia found were barred pursuant to the FLSA’s overtime exception for certain retail, commissioned employees.  The decision, Jones v. Tucker Communications, sheds favorable light on the meaning of the most litigated aspects of the so-called “7(i)” exception, namely the meaning of “retail” and “commissions.”

The employer, Tucker Communications, was a service provider for Charter Communications, a large cable and internet provider.  Charter paid Tucker according to a fee schedule for services that Tucker’s cable technicians performed for Charter customers.  Each morning of the workweek, Tucker gave its technicians a list of jobs for the day.  They were paid a set amount for each type of service they performed.  Importantly, they could increase their compensation by working quickly and asking for extra jobs to fill the day.  They could also earn more by  upselling.

The cable technicians filed suit, alleging that Tucker violated the FLSA by failing to pay them traditional “time and a half” overtime pay.  The court conditionally certified a collective action, and the class grew to include 146 cable technicians.  Both sides eventually moved for summary judgment on the applicability of the 7(i) overtime exception, among other issues.  Tucker won. 

The 7(i) exception—so named for its codification at 29 U.S.C. § 207(i)—has three requirements.  The first, which is to pay 1.5 times minimum wage for all hours worked, was not at issue in Jones.  Instead, the case focused on the requirements that the employer is a “retail sales or service” establishment, and that the employee earns over half her pay in “commissions.”

Ruling in Tucker’s favor, the court found that the technicians were employees of a “retail service” establishment.  Most important was that the install and repair services provided by Tucker were not resold—they were provided to end users.  While the technicians argued that any retail aspect of their work was lost because they were serving Charter, not the public, the court rejected this assertion.  Regardless of whether Charter might be considered Tucker’s customer, it was enough that Tucker provided services directly to the end cable and internet users, thus serving the needs of the community. 

Second, the technicians were paid “commissions.”  While commissions oftentimes involve payment based on a percentage of each sale made, there is no requirement, the court noted, that commissions be proportionate to (let alone a percentage of) the amount customers pay.  Rather, the mark of a commission is that it incentivizes employees to work effectively and efficiently for the employer—it is, in a sense, the antithesis of hourly pay.  The technicians were clearly incentivized to work this way:  the more jobs they completed, the more they earned.  In turn, the court concluded that, regardless of whether the technicians or Tucker labeled the compensation plan a piece rate pay plan or something else, the facts showed that it constituted a commission. 

This recent decision is an obvious and significant victory for Tucker, which has defeated the claims of a 136-person class and earned confirmation that it’s compensation plan complies with the FLSA.  It should also prove useful to other employers—especially those in the telecommunications industry, where installation and repair service subcontracting is common—looking for guidance on the application of 7(i) to their commissioned employees.