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Automobile Repair Business May Pay Collision Mechanics on Commission Basis under FLSA

    Client Alerts
  • March 23, 2007

Under Section 207(a)(1) of the Fair Labor Standards Act, employees in certain retail stores or service establishments are exempt from overtime requirements if their base wage exceeds one and one-half times the minimum wage, and over half of their pay derives from commissions.  In a recent case, the Seventh Circuit Court of Appeals applied this exception to mechanics in a collision repair business.  The plaintiffs sued for unpaid overtime, claiming that the mechanics were more akin to pieceworkers than service sector employees, and that the overtime exemption does not apply to such blue collar work.


The Seventh Circuit disagreed, finding the exemption applicable to these employees.  The court analogized mechanics to real estate salespersons, finding no functional difference between application of the service sector exemption to either.  The mechanics’ income was based on volume of work performed, the same as any sales commission.  Even if a team of mechanics divides commissions among themselves based on hours worked, this does not defeat the exemption.  Mechanics in automobile dealerships and other non-collision repair services are already subject to a separate exemption relating to vehicle sales.  This case expands exemption opportunities to collision centers and other stand alone repair businesses.  This case also presents employers the opportunity to think more creatively over who in their organizations could be considered to work under a commission system, possibly entitled to this overtime exemption.