Questions qnd Answers on Woge-Hour Low Retqil Exemptions Of Lumber qnd Building filoteriol Deqlers

1. Q. What makes my operation subject to the general coverage of the F'air Labor Standards Act (Wage-Hour Law) ?

A. Prlmarlly beca,use the purchase and rocelpt of matorials from outside your State constitutes "interstate commerce.t' The ssme conditlon exists where goods a,re sold to customers in other States.

2. Q. I understand there is an exemption in the Wage-Hour Law for retail establishments. What does that saY ?

A. Ifds is what we refer to as the Sectlon 13 (a) (2) exemptlon, and provldes that tho minimum wago and overtlme provlslons shall not apply wtth respect to:

"Any employee employed by a,ny retatl or sorvice esta,bllshment' more than 50 per oontum of whlch eetabllshment/s snnual dollar volume of sale€ of goods or sorvices ls made wtthtn the Stato ln whlch the establlshinent ls loeated. A 'retall or senrlce eetebllshment' shall mean &n establishment ?5 por centum of whose annual dollar volumo of sa,les of goods or servicos (or of both) ts not for resale and ls recognfued as retall salee or services ln the partlcular lndustry."

3. Q. What is meant by "Annual Dollar Volume of Sales" mentioned twice in that detrnition ?

A. The rule adopted is that an establlshmont's status for a,ny ca,lendar quarter wtll bo iletermined on the basis of lts sales for the preceding 12 months' perlod (four calendar qua,rters).

4. Q. .what is meant by the expression "recognized as retail sales or services in the particular industry" ?

A. To simply say that "lndustry recognltion" means traditlonal usage and practice would not be an answer to your questlon wlthout a revlew of custom a,nd usage in our lndustry. As a, matter of fact, we mlght even sa,y that the questlon ls stlll unanrswered to some extent lnsofar as the Wage-Ilour Administrator is concerned. N. R. L. D. A. has recommended to the Adnlnlrtra,tor certaln approaches as & guiilo for lnspectlon and enforcement purpose8.

,Wo agree with the Athninlstrator when he says that tn l<tentifylng sales recognized as rotell ln tho lnilustry, we must start by consldorlng the charactoristics of establishmonte which aro recognized as retall ln the lndustry.

Ths bostc a,pproa'ch to thls ls to determlne whether the ostablishment maklng the sele has recognlzed retall characterlstics and performs recognfued retail functlons-in.other words, does the retall concopt apply to the estabHshment ?

Such characteristics are typlfieil by facllities a,nd services which are employed in the successful accomplishrnent of the rotall dlstrlbution functlon and these ha,ve been summarlzed ln our recommendotlons to the Admlnlstr&tor.

5. Q. It sounds to me like the sales pattern of a dealer is the principal factor in determining his exemption from the coverage of the Wage-Hour Law. Has aJly kind of form been prepared to help the dealer analyze his sales?

A. The &ntwer lg "Yes" to both parts of your query.

In 1961 the Natlonol Assocletdon allsffibuted throughout tho lntlustry a Status

By fhe NATIONAI

R,ETAII LUMBER. DEALERS ASSOCIATION

Booklet contalning an analysls of the Wage-Hour Division's Interpretative Bulletln Pa.rt 7?9 covering "Betail and Service Establlshments and Rela,ted Exemptlons." Thls Status Booklet, like the present Questlons a,nd Anslers, was prepared ln collaboratlon with our counsel. Maclelsh, Spray, Prlce & Ilnderwood of Chlcago. Copios of this booklet were furnished to all ffeld ofrces of the Wage-Hour Dlvlslon.

On pago 8 of this booklet ls a Rotall Establishment Dxomptlon Check-List based on the Admlnistrator's lnterpretatlon of the Section 13 (a) (2) exemptlon. Of course, ln uslng this check list the explanatlon of the terms and items conta,ined in the booklet should be consulted.

I)ealers and thelr a,ttorneys have found the booklet qulte useful ln analyzlng sales and determlnlng the establlshment's qua,lifica,tlon for exemptlon under the Act.

6. Q. I consider my business exempt after analyzing my sales on this CheckList. However, I have a millwork plant in connection with my retail yard. Would this affect my status ?

A. Not necessa,rily. Another section known as 13 (a) (4) provldes tha.t an establishment which can qualify under the 13 (a) (2) exemption as a retall establlshment wlll not be tlenied exemptlon by roason of the fact that tt makes or processes the goods it sells lf the followlng additional requlrements are present:

(a,) the esta,blishment is recognized as a retail establishment in the pa,rticular industry;

(b) the goods which the exempt establishment makes or prooesses are made at the establishment which sells them; and

(c) more tlnan 85o/o of the annual dollar volume of sales of the goods which the establishment makes or processes a,re made wlthin the State.

7. Q. I have a branch yard, and I send some of the windows and doors I make at the yard with the millwork operation over to this other yard for sale. Will that qualify me for this 13 (a) (a) exemption?

A. The &nswer ls probably "Yes." The exemptlon would not be lost because of the mere fact that some of the millwork of tho ma,nufacturlng yard was dfutributetl through other yards of the sa,me ovr'nership or otherwlse. However. mlllwork sold or tra,nsferred to othor yards for resa,le by them would not quallfy as "rotall sales" to the millwork yard and lf such sales or transfers plus other "wholesale" sa,les of the mlllwork yard exceedd 2570 of its tota,l salee, the exemption would be lost.

8. Q. My retail operation is larger than my millwork manufacturing operation at that particular yard. Is there any way I can qualify for the retail exemption, at least for the retail yard?

A. If you manufacture doos, wlndows and special mlllwork at thls locatlon amd can not quallfy under tho Sectlon I-3 (a) (4) exemptlon for a,ny re&son, the entlre retall operatlon wlll lose lts oxemptlon unless the manufacturlng operatlon ls sufffclently segregated so as to constltute a separa,te establlshment.

If the ma,nufacturlng and retail operations are so separa,ted, employees in the segregated retall part of the business could be exempt as a separate retall establishment. For a dlscussion of what constitutes a soparate establishment, see the discusslon at pages 1? and 18 of the Status Booklot. However, office employes whose rqork dlrectly relates to both the ma,nufacturing a,nd retall operatlons would not be exempt rega,rdloss of whether their office wa"s physlcally located in the ma^nufachrring or the retall part of the business.

9. Q. I do some contracting business out of my retail yard. What effect would that have on my exempt status ?

A. If your contra,ctlng departrnent ls segrogated and the work ls carrled on by sepa,ra,te employes, the contractlng work would not defeat exemptlon for tho reta,ll part of your buslness. The sta,tus of employos in the contracttrg department would be considered separately.

The tJpe of contractlng done by retall dealers usually is local ln nature, such that the employes are not even subject to tho baslc coverage provlslons of the Act' l.e. they aro not engaged ln interstate commerce. Ifowevet, lf the employes in the contractlng part of the business go from State to State ln thetr work or if they unload materlals just received directly from other States or load or handle materials lntended for shlpment to other States, they would be baslcally covereil bY the Act.

10. Q. The volume of mY contracting business is not large enough to.be a separate operation. Does the fact that I run it all through my books as part of my retail operation make anY difference ?

A. There are really two facets to thls answer. First; the effect on your sales pattern. \ilhere retail yard stocks are used by a dea,ler in his contractlng work, such tra,nsfers wtll be considered tr the same light as if sold to an outslde contractor. They wtll be elther wholesale or retall as the case may be under the resale and lndustry recognltlon tests.

Second; some queetlon has been ralsod as to the status of construction employes of an employer who oporates a, reta,ll yard and also engeges ln contracting work.

It ts llkely that construction employes under these clrcumstances would not be consldered as employed by the exempt reta,tl esta,bllshment, and therefore would not quallfy es exempt employes undor Sectlon 13 (a) (2).

Stnce they are employed ln the contra,cting phaso of tho business they would not be consldered retall employes beca,use butliting eontractors, according to Bulletln 779' a,re not onga,ged ln the type of buslness whlch has recognized retall characterlstlcs.

Thls does not mean, however, that locol butlillng constructlon employes are subject to the Act. Such employes wlth somo exceptlons ano not withtn the boslc coverag:e provlslons of the law because they are nolther engaged ln commerce nor ln the proiluction of goods for commoroe.

11. Q. You seem to be referring to employes of my contracting department who are engaged in actual construction work.

But how about my office employes who do work for both branches of the business?

A. As a practical matter, in a,n operatlon such &s yours (whtch ls t54ptcal of most doalers who do this kind of business) contractlng office work is normally minor and incidental as compared u'lth reta,il ofrce work. Further, little contracting work Ls under basic coverage, so we have urged that the Admlnlstrator take the position that ofrce work of a retall dealer doing contraoting work should be consldered as a, comblnatlon of reta,ll exempt work and non-covored work, neither of whlch ls under the Act This is in accorda,nce with the Division's ruling which permits two types of exempt work to be combined for exemption purpoees.

This is one of the borderline situations ln whlch the fa.cts mlght cast the dle elther way. If the constrrrction activity is substa,ntial a,nd for any rea^son is subject to the Wage-Hour Law, olfice employes whose work directly relates to the construcflon pa,rt of the business (book-work or other office work) could be covered. Conversely, lf your construction work is not subject to the Act, retail office employes should not loso exemption, merely because some of thelr work relates to the construction actlvity. Until the courts havo clarified this situation, it must be considered an open queetlon on which you wlll undoubtedly want to be guiited by your attorney,s advice.

12. Q. Speaking of contracting, I notice on this Exemption Check-List that we should enter the amount of our sales to contractors for "other than residential or farm construction, repair or maintenance" as "wholesale sales." We have always considered sales to contractors building or repairing a church playroom, or a store front, or a filling station, or a barber shop, and things like that, as retail sales. Why do you now say we should classify them as wholesale sales ?

A. You are not the first dealer a,stounded to leann tha.t the Wa,ge-Hour Divlslon has reversed its former interpretation on thls polnt. The rea,son we show such sales ln the wholesa.le category is beca,use the Divi- slon has stated in its brterpretatlve BulIetin, Part 779, that they will be classed a,s wholesale sales for enforcement purposes.

It ls our oplnion that this t5pe of sale ls for use and consumption, a,nd we believe the AtLninistrator's ruling is wrong because such sales aro recognized as reta,il ln the lndustry.

\ile have pofurterl out to the Division that their ruling is not based on custom and usag:e; lndustry recognition; or former rullngs a,nd furterpretations-fun fact, it is contrary to all of these.

Ilowover, until tho courts rule on this questlon a dealer's only alternatives are (1) to follow the Adminlstrator's classificatlon of such sales a,s "wholesale," or (2) to run the rlsk of violatlon and possible fia,bifity for wages if the Arlministrator's position ultimately is sustalned ln the courts. Hero aga,in is a point on which guidance by your a,ttorney is deslra,ble. In this, the discusslon of the problem tn the Appendix A of the Status Booklet may be helpful.

13. Q. Suppose I sell building materials directly to the church, or department store, or the fire station for use in construction, repair or maintenance-how would you classify such sales ?

A. Such sales are for use a.nd consump- tlon rega,rdless of the t5pe of consumer lnvolved. Genera,lly speaklng, sales of building materials made dlrectly in the normal course of retail trading to such consumers for their own use and consumption, whether the consumer bo a private individual, a commercial eeta,blishment, a pubtc uttlity, a transportation company or a, church, will be recogrrlzed as retail sales under the exemption.

It should be noted, however, that the Ailministrator takes the position that sales for such uso under somo clrcumsta,nces might not qualify under the industry reta,it recognition test, i,e. sales for use on large projects involvfurg direct carload shipments where the dealer merely performs a ..jobber" functlon. If you have a substa,ntial amount of such sales you and your attorney may wlsh to review the discusslon of this point at pa,ges 13 and 14 antl Appenilix B of the Status Booklet.

14. Q. What about my sales to speculative contractors or builders for residential construction ?

A. Such sales which have been traditionally considored for use and consumption in the lntlustry &re now classed by law as reta,il sales.

A new section 3 (n) wa^s added to the Falr Labor Standards Act by the 1949 amendments readlng as follows:

"S (n) Resale shall not include the sa,Ie of goods to be useil in residential or farm bullding construction, repalr or mainterulnce: Provided, that the sale is recognized a^s & bona, fide retall sale in the industry."

This means that srrch sales a,re reta,ll sales when they a,re recognlzed in the butlding materia,ls industry a,s such; i.e. they a,re subject to the "lndustry recognition" tests as sales to other classes of consumers.

15. Q. I am sure my sales pattern definitely establishes the fact that my yard qualifies under the 13 (a) (2) exemption. Are all my employes exempt ?

A. The basic test under this exemption is the na,turo of the establlshment and not the work of the particula,r employes ln it. ff tho establlshment is exempt then all of its employes whose work relates exclusively to the business of that esta,bllshment are exempt no matter what they do.

16. Q. Suppose my operation is such that the establishment can not qualify for the retail exemption. Would any of my individual employes be exempt ?

A. Some of them may be able to qualify undor one of the so-called "individual" or "white-collar" employee exemptions, tf they are employed in an executive, admlnistratlve, or professional capaclty, or in a local retailing capacit5r, or as an outside salesma.n. The Division has issued bulletins deffning theee terms and Iisting the tests which must be met ln ea,ch category to quallfy for exemptions,

In determining the appllcation of these exemptlons the work of each employee must be analyzed on an lndividual basis. It ts tho actual work performed and the lBporslblllties (and ln the caee of creoutive, admintstrcttvo and profcslonal €mr ployee-tho salary) ol the lniltvfulual om- ploye whlch determines whether he quallffoe for exemptlon.

- 17. Q. All I have heard is that the new minimum wage is $1.00 per hour for nonexempt employes. I pay my employes on a salary basis. Have any minimums been established for salaried employes ?

A- Yc-For a 40-hour workwo€k, the tninlmrrm 'for salarled employes ls $40 a wook, or $80 every two weeks. The Ai[ntnlstlotor has also ruled that $86.67 semi.monthly or $173.33 a month palil salarted employee wlll meet the mlnlmum criteria.

It shoulal be noted, however, that this mlnlmum does not satlsfy the over-tlme requlrments of the law. In any woek ln whlc{r a,n employe works more than 40 hours hls regular hourly rate of pay must be computed and he must be pald one and I hslf tdmes that rato for the overtlrno work.

18. Q. I pay several of my employes a monthly salary and bonus which amounts to considerably more than that minimum. Doesn't that fact make them exempt ?

A. As et&ted tn the precedlng anawer, the fact thst an employe's sa,lary ls more than the mlnlmum does not relleve hle employer from paylng overtlme. A salarled enployee may be exempt as a "whlte@lla,r" worker, but not because he ls pald a solarSr alono. Ife must meet the rather strlct requlrements prescrlbed for the whltecollar exemptlon.

19. Q. f have a man in charge of my Hardltrare department that I pay $400 a month, plus a bonus. He has two men working for him; does his own hiring and flring and does his own ordering and pricing. Would he qualify for one of these whitecollar exemptions ?

A. ThtB job ilescrlptlon sounds like the man would qualify under the executive ex- ' emptilon. Ire is patd more than the $55.00 , per week minlmum; he hlrea and dlrects tho work of two other employes; he exerelses dlscretionany powers ln buylng and solllng amd supervlsory dutles. Therefore, he would be exempt lf he meets the last test; na,mely, he does not devote more than 2O/o oI hls tlme to work not directly essenfol to hle supervlsory, purchasing and selllng worlc A common mista,ke tn apptylng thege "white-collared" exemptlons ls to aseumo that the selary test alone ls controlllng. Thte ls erroneous. The WageHour Dlvlslon haB lrrclsted ln substantlal wage restltutlons ln numerous cases beceuse (desptte htgh salary) other tests were not met.

20. Q. f have two salesmen who a,re outside calling on the trade, selling builders and contractors on a straight commission basis. What would their status be?

A. Thoy would quollfy under the outside sale$n&n oxomptlon unless they spend more thaln 2O7o of thelr tfune in the ofrce or elsewhere on work not dlrectly related to thelr outsldo selea work.

21. Q. I have several employes who do nothing but handle the sales at my retail counter. They wait on customers who come in, and others who call up. They make out their own tickets, and do their own wrap- ping and weighing when necessary. They have a small pick-up truck, and they take turns delivering locally some of their retail orders. Where do they stand under this Wage-Hour Law?

A. They would elso be exompt from the mlnlmum wage and overtime provlslons of theWage-Hour Law under the same'rwhltecollar" exemptlons. They would quallfy as employees ln a "Iocal retalllng cspaclty."

Thls would bo true even though the yard Itself rllil not quallfy as a "retall establlshment" under Sectlon 13 (a) (2).

22. Q. My yard definitely qualifles as a retail establishment under the Section 13 (a) (2) exemption. Is there any special form of records f have to keep?

A. The regula,tions do not prescribe any sot fom ln whlch records must be kept. If your employes are totally exempt from tho mlnlrnum wage and overtlme provislons, the only informatlon you are requlred to keep concernlng eaeh employe,is:

1. Name fur futl as lt appears on Soclal Securtt5r records.

2. Home address.

3. Employe's occupatlon.

4. Date of birth lf under 19.

5. Place or places where the worker ls employed.

In vlew of the fact that you cla,lm exemptlon under Sectlon 13 (a) (2) you wlll, of coursq need to have figures on your sales volume and tlckets or lnvoices whlch show tho breakdown by fupe of transactlon (1.e. wholesale or retail). It ls, of oourse, poesible to classlfy all sales. Slnce there are relatlvely few "wholesale" sales (as described ln the Status Booklet Check-Ltst) many dealers find lt convenlent just to keep a runnlng record of such sales. The totel volume of such wholesale sales cen not exceed 25/s of totol sa.les of the establshment for the perlod ln questlon.

23. Q. Suppose I consider my operation to be covered, what then?

A. There ls much more lnvolved ln full compllance, when this ls necessary because the estab[shment ls under stahrtory coveroge. It ls for thls reaaon t,hot oll deolerg should analyze tholr eal€s potterns.

The fact that a tleoler le volunta'rlly comptylng wlth somo of the roquirements of the Act does not loso hlm the rlght to clalm tlro rotail exemptlon should he over run lnto troublo as o result of a complla,nce chock.

An establlshment that ls actuolly eubject to the law, because lt can not quallfy for the exemptlon, must keep much more ela.b. orate rocords a,nd follow complicatod formulae for determlnlng regular rates of pay, and computilng the proper overtlme due each employe.

An exempt doalet's ready ablltty to provo hls quallflcatlon for exemptlon could prevent a lot of iletalled examlnetlon of tlme and payroll reeords, and ln somo lnstonceg mlght even avold unwarrantod clalms for overtlmo and other penaltles aga,lnst hlm.

24, q. I have always paid more than the minimum rate just to be on the safe side, although I think my operation is exernpt. Isn't that all right ?

A. As I have prevlously explalned, an exempt doa,lor con, of coumq comply wlth any or all of the statutory provlslons on a voluntary basis wlthout walvlng the rlght to clalm exemptlon lf occaslon arises. IIowever, the dealer who ls legally subject to the Act fa,ces an entlrely dlfforent problem -he must comply strictly with tho many substantlve and technlcal requlremente of the law, regulatlons and lnterpretatilons.

25. q. I have never carefully analyzed the sales of my yard and have pretty much assumed that the yard is exempt. Isn't there time enough to correct the situation if a Wage-Hour inspector flnds I am subject to the Act ?

A. It ts too late then. Overtlme a,nd other wag'o nsnUff ls retroactlve for two years and ca,n be doubled ar a penalty. A short tlme ago a, medium-slzed alealer patil wage restltutlons of approxlmately $25,00O because of a mlstaken vlew that he was exompt.

Tho questlons of covorage or oxemption for oll yards a,nd of compllanso for nonoxempt yords are eesentdally lega.l problems and a mlstake or error of judgment can be most costly. Therefore, ln any borderllne sltuations we strongly rocommend that dealers consult thelr legal counsel ln resolvlng these baslc questlons.

Stuiltes by The Travolers fnsurance Compa,nles show that drlver error ansed, 85/s of the highway accldents ln 1959.

Top Home Builder Merchondisers Honored

ChicagG-Top national merchandising' awards for home builders, their salesmen and builder-sponsored "Parade of llomes" promo- tions were announced at the National Association of llome Builders convention here.

Climaxing its coast-to-cdast 1960 home builder program, Georgia- Paciflc Corp. presented the top award, a 1961 auto, to Builders Hobart Whitney and John L. Taylor for their Briermoor Manor model home merchandising program at Atlanta, Ga. Their a'firard choice, a Studebaker Lark stationwagon, was presented by .w. H. Hunt, G-P vice president for plywood and specialty sales.

ft was one of eight model-home merchandising awards in three categories, based on extensive reports from .,mystery shoppers', who toured model homes from coast to coast for such points as quality of salesmanship, literature, special displays, advertising, site signs and even construction quality.

Top award for the best personal selling job went to Robert Dunham, salgsman for Osman-Amron Inc., builder of Olde York Estates at Cranbury, N.J. He received 9200 cash and the G-p salesman plaque.

The "Parade of Homes" award of $250 went to the Home Builders Association of Mobile, Ala., for its highly-successful 1960 "parade."

Runnbr-up awards for best builder merchandising, g100 "8" bonds, went to John Chaney, Monterey subdivision in Baton Rouge, La.; John Crosland Co., Beverly Woods in Charlotte, N.C.; R. A. Posther, Castle Hills Terrace in San Antonio, Tex. and Master Home Builders, Richland, Wash.

Runner-up for the best personal selling job was Mrs. Samuel C. Newman, saleswoman for Scenic Hills Country Club Estates, built by Handsel B. Butts, Pensacola, F'la.

The Georgia-Pacific builder program included in-home displays, identification plaques for various woods used in model homes, site sig'ns and a national supporting advertising program in full color, all furnished by the big plywood, hardboard and redwood, fir, pine and hardwood lumber manufacturer.

In making the presentations, Hunt said the G-P program "is part of continuing efforts to help builders with their merchandising problems."

Seqlzit Gun ond Monoform Roofing Licensed In Gqnqdq

The Flintkote Company of Canada, Ltd., of Toronto and The Sealzit Company of Riverside, Calif., wholly-owned subsidiaries of The Flintkote Company, today announced licensing of their special Monoform roofing system throughout Canada.

The Sidney Roofing and Paper Company, Limited, of Burnaby, 8.C., with its affiliate, Bishop Products, Ltd., of Toronto, will promote and sell the Monoform System which includes the leasing of the Sealzit Gun to franchised roofing applicators.

Developed by Flintkote research, The Monaform System comprises a seamless, membrane roofing coating of asphaltic emulsion compounds reinforced with chopped glass flbers sprayed in a onephase application with a Sealzit Gun.

The announcement for large-scale entry in the Canadian construction market was announced jointly by R. G. Wace, vice president of Flintkote and Harold, Mears, vice president in charge of sales for the Sidney Company.

Mr. Wace stated that this revolutionary new-t1pe roofing ap- plication is being hailed as the "first major change in roofing practice in 50 years." The Sealzit gun applies Monoform roofing at rates up to 3,000 sq. ft. or more per hour with a three man crew. It has been enthusiastically received in the U.S. by more than 150 franchised roofing contractors, he said, and will contribute economically to Canada's rapidly growing industrial facilities.

Troining Course for OLA

Oklahoma Lumbermen's Association has set the dates of January 30-31, February 1,2,3 and 4 for its 11th annual Training Course for managers. It will be held at Oklahoma State Ilniversity, Student Union Building, Stillwater, Oklahoma. Hugh Hughes is chairman of the OLA educational committee. Bill Morgam, secretary, advises that those interested should make reservations by writing Student Union, Stillwater, Oklahoma. Be sure to state you are attending the OLA-OSU Management course, he adds. Many well known names appear in the list of those who will conduct the course.

(Tell them. Vou sau it in The Californin Lumber Merchant)