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The American Society of Travel Agents (ASTA) has formally petitioned the U.S. Department of Labor (DOL) for removal from a regulatory list that blocks travel agents from an exemption from federal overtime rules.
“Travel agencies are the very picture of a retail business, so we think it’s indefensible that agencies have been held to ‘lack a retail concept’ since 1970 and thus are denied use of the retail exemption from overtime rules,” said Zane Kerby, ASTA’s president and CEO. “With major changes to overtime regulations going into effect on December 1, it is all the more critical that this issue be addressed and we will fight for our members at DOL and before Congress if necessary over the coming months to make it happen.”
Under the new overtime rules issued in May, the salary threshold under which virtually all employees are guaranteed overtime pay will increase from $23,660 to $47,476 per year, with automatic increases in future years. These rules go into effect on December 1, 2016.
There is a long-standing exemption in current law that could help some travel agencies avoid the costs and complexities that will come from complying with the new overtime rules – the Retail or Service Establishment (RSE) exemption, ASTA said. To qualify for this exemption, an employee must work at an establishment “recognized as retail…in the particular industry” and where at least 75 percent of annual sales are “not for resale.” Further, the employee in question must be paid at least one-and-a-half times the applicable minimum wage and more than half of the employee’s earnings must consist of commissions.
Since 1970, however, travel agencies have been blocked from using this exemption due to a DOL regulation that included travel agencies on a list of industries that are deemed to “lack a retail concept” and thus can’t qualify for the RSE “under any circumstances.” In the only court case that directly address the propriety of including travel agents on this “blacklist” (Reich v. Cruises Only, Inc., 1997), a federal court found in favor of the travel agency, determining that DOL’s regulations “excluding a travel agency from those establishments possessing a retail concept appear to be arbitrary and without any rational basis,” ASTA said.
In a petition issued Friday, ASTA argued that “the intent of the [RSE] exemption was to cover services to the general public meeting the everyday needs of the community at the very end of the stream of distribution, involving sales in small quantities and no manufacturing. This is the very picture of what the typical travel agency does…The relief sought by ASTA for travel agencies is warranted because the blacklisting was unjustified when adopted, is unjustified now, has been rejected in the courts and is easy to correct.” In addition to making changes to the regulation itself, ASTA is asking that DOL issue a formal “Administrator Interpretation” stating that it will follow the decision in Reich v. Cruises Only, Inc. and that conforming changes to the DOL Field Operations Handbook be published. The full text of the petition can be viewed here.
“To be clear, getting travel agencies off the blacklist is not a cure-all – it will provide some relief from the new rules for some agencies,” said Kerby. “But travel agencies are clearly ‘retail’ and should have an opportunity to claim the RSE exemption if they qualify for it. This is a fight worth fighting.”
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