[Congressional Record Volume 140, Number 35 (Thursday, March 24, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 24, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
              LEGISLATION TO SIMPLIFY APPLICATION OF FLSA

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                         HON. AUSTIN J. MURPHY

                            of pennsylvania

                    in the house of representatives

                        Thursday, March 24, 1994

  Mr. MURPHY. Mr. Speaker, I rise today to introduce legislation to 
simplify application of the Fair Labor Standards Act [FLSA] to 
commissioned sales personnel.
  As many of my colleagues know, the FLSA has an exemption for both 
outside sales representatives and inside commission sales personnel. In 
the case of outside sales, the exemption is from the minimum wage 
requirement as well as the overtime premium pay requirement, section 
13(a) 29 U.S.C. 213(a). With respect to inside commission sales 
personnel, the exemption is only from the standard overtime pay 
requirements, section 7(i) 29 U.S.C. 207(i).
  Under current law, the 7(i) exemption applies only to retail and 
service establishments. In order to qualify for the exemption, it 
requires that an employee must receive at least 1\1/2\ times the 
minimum wage for all hours worked, and at least half of the employee's 
compensation must be in the form of a bona fide commission sales 
program.
  I am concerned with the affect of this exemption on wholesale 
suppliers, who often compete head to head with retailers. In the past 
wholesalers frequently had outside sales representatives who visited 
commercial customers on the road. Today, conditions in various 
industries have changed, especially the building materials industry. 
Previously wholesalers sold building supplies and materials to 
contractors and retail merchants for resale to the public. Now in that 
industry, major retailers have become the biggest players.
  These corporate retail giants generate a large volume of business 
through multiple retail warehouse sales outlets dispersed over wide 
geographic areas. Thus, they are large enough to purchase directly from 
manufacturers and either operate their own distribution network or have 
factory shipment directly to their retail locations. Consequently, 
wholesalers no longer play a role in selling building materials or 
supplies to major retailers in that industry.
  Many of these major retail operations also operate contractor or 
builder departments which often have special hours, separate phone 
lines, job site delivery systems, and volume purchase discount pricing 
policies to service builders. Such retail operations may, and often do, 
take full advantage of the 7(i) overtime exemption for their sales 
personnel, including their contractor or builder department personnel. 
Such inside sales personnel may make solicitation phone or fax calls to 
builders and contractors or respond to product inquiries and take 
orders from builder-contractors, by phone, fax, mail or over a counter.
  Wholesale supplier's inside sales personnel engage in identical 
business activity, contacting or responding to builder/contractors, 
making sales, and arranging delivery. These wholesale sales personnel 
also receive compensation in the form of commissions on sales, yet 
their employers are excluded from making use of the inside commission 
sales exemption.
  I am concerned about the impact of the 7(i) exemption in the building 
supply industry. The exemption tends to competitively favor massive 
corporate retailers over local or regional wholesale distributors. 
Since such wholesale distributors are the only link to the 
manufacturers for small local building material supply retailers, the 
current exemption may also favor the largest building material 
corporate retailers over smaller ones. As more wholesale distributors 
are eliminated from the building material supply industry, small retail 
suppliers may be cut off because their operations are too small for 
direct purchase from manufacturers or not large enough to cost 
effectively operate their own shipping and distribution network.
  For the reasons I have outlined, I am introducing legislation to 
apply the 7(i) inside commission sales exemption to employees of 
wholesale suppliers. I would accomplish this objective by striking 
statutory reference to retail and service establishment rather than 
adding language to cover an additional category of employers--
wholesalers. The distinction is, of course, only semantic but such 
differences can sometimes also have important political implications.

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