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# 3240 - MICHIGAN: "FARM IMPLEMENT" OVERTIME EXEMPTION

Michigan dealers covered by the Federal Fair Labor Standards Act or the Michigan State Minimum Wage may now qualify for the "farm implement" overtime exemption if, and only if, they are primarily engaged in the business of retail selling of farm implements, meaning that over half of the employer's annual dollar volume of sales must come from the sale of farm implements to ultimate consumers. If the employer qualifies under this test, then the exemption applies to each salesman, partsman, or mechanic who spends over 50 percent of his or her time selling or servicing "farm implements", which generally includes equipment ordinarily used by farmers, such as equipment necessary for plowing, planting, thinning, weeding, fertilizing, irrigating, and harvesting of crops, and raising of livestock. It does not include such specialized equipment as bulldozers, scrapers, land levelers, graders, and the like. It also would not include other types of non-agricultural equipment, such as lawn mowers or lawn tractors. Note: If the sale of parts and service work are more than 50% of total sales, the business does NOT qualify for the overtime exemption.

The exemption applies on a week-by-week basis, so that an employee would be entitled to overtime during any week in which 50 percent or more of his or her time is spent on business other than selling or servicing farm implements. This can create a problem for a dealer who does not deal exclusively in farm implements, since the dealer will have to keep track of the amount of time spent by employees on farm implement business as compared to "lawn and garden" or other types of business on a week-by-week basis. Often, keeping such records may be more trouble than the exemption is worth. However, if such records are not kept and a disgruntled employee or former employee decides to challenge his employer's payroll practices, the employer will have a difficult task of establishing the exemption. If it is determined that an employer inappropriately availed itself of the exemption, liability can include payment of unpaid overtime for the last 2 years (3 years in the case of willful violations), liquidated damages of an equal amount, plus attorney's fees.

Because of the pitfalls involved in inappropriately claiming an unavailable exemption or in failing to properly document an otherwise proper exemption, your Association suggests that all dealers think long and hard before relying on the "farm implement" exemption. For those dealers who clearly qualify for the exemption, the record-keeping requirements of the FLSA may make claiming the exemption more trouble than it is worth. For those dealers whose product mix or gross volume of sales make application of the exemption more questionable, the benefits derived from the exemption are probably not worth the risk of being found in noncompliance. For all dealers, given the competitive marketplace, paying your hourly employees overtime irrespective of whether you are required to do so by law will assist you in recruiting and retaining a competent staff capable of delivering quality service to your customers.

Refer to FastFacts #3120, Federal Fair Labor Standards, for other exempt employee classifications from overtime.

-- June 2007