                  FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

JERRY GIEG,                            
                 Plaintiff-Appellee,
                v.                           No. 03-35619
DRR, INC., an Oregon corporation,             D.C. No.
dba Courtesy Ford, and WOODY               CV-98-01563-ALH
HOWARTH,
            Defendants-Appellants.
                                       
        Appeal from the United States District Court
                 for the District of Oregon
        Ancer L. Haggerty, District Judge, Presiding


JOSEPH C. WICKERSHAM,                  
                Plaintiff-Appellee,          No. 03-35707
               v.                             D.C. No.
HASELWOOD BUICK-PONTIAC CO.,               CV-01-05557-FDB
             Defendant-Appellant.
                                       
       Appeal from the United States District Court
          for the Western District of Washington
       Franklin D. Burgess, District Judge, Presiding




                            5337
5338                      GIEG v. DRR, INC.



MARTIN CHALOUPKA, LISA BENNETT,            
BRADLEY HAYES, and JOHN
                                                Nos. 03-36009
INSELMAN,
                                                      04-35121
                Plaintiffs-Appellees,
                                                   D.C. Nos.
                 v.
                                              CV-02-00743-GMK
SLT/TAG, INC., an Oregon                       CV-02-01053-GMK
corporation, fka Thomason Auto                 CV-02-00065-GMK
Group, Inc. and ASBURY
                                                   OPINION
AUTOMOTIVE OREGON, LLC,
             Defendants-Appellants.
                                           
         Appeal from the United States District Court
                  for the District of Oregon
           Garr M. King, District Judge, Presiding

                   Argued and Submitted
             November 4, 2004—Portland, Oregon

                        Filed May 18, 2005

      Before: Stephen S. Trott and Andrew J. Kleinfeld,
     Circuit Judges, and Louis H. Pollak,* District Judge.

                     Opinion by Judge Pollak




  *Honorable Louis H. Pollak, United States District Court Judge for the
Eastern District of Pennsylvania, sitting by designation.
                      GIEG v. DRR, INC.                 5341


                        COUNSEL

Timothy R. Volpert, Davis Wright Tremaine, LLP, Portland,
Oregon, for defendants-appellants DRR, Inc., et al. and SLT/
TAG, Inc., etc.

Jacqueline L. Koch, Koch & Deering, Portland, Oregon, for
plaintiff-appellee Jerry Gieg.

Ford F. Newman, U.S. Department of Labor, Washington,
D.C., for amicus curiae the Secretary of Labor.

Felicia R. Reid, Curiale Dellaverson Hirschfeld Kraemer &
Sloan, LLP, San Francisco, California, for amici curiae the
National Automobile Dealers Association; National Federa-
tion of Independent Business Legal Foundation; National
Independent Automobile Dealers Association; Recreation
Vehicle Dealers Association; and Marine Retailers Associa-
tion of America in support of the defendants-appellants.

John R. Scannell, Action Employment Law, Seattle, Wash-
ington, for plaintiff-appellee Joseph C. Wickersham.

Patrick M. Madden, Seattle, Washington, for defendant-
appellant Haselwood Buick-Pontiac Company.

Robert J. Bekken, Fisher & Phillips, LLP, Irvine, California,
for defendant-appellant Haselwood Buick-Pontiac Company.

David F. Sugerman, Paul & Sugerman, PC, Portland, Oregon,
for plaintiffs-appellees Martin Chaloupka, et al.
5342                       GIEG v. DRR, INC.
Christopher P. Koback, Davis Wright Tremaine, LLP, Port-
land, Oregon, for defendants-appellants DRR, Inc., et al. and
SLT/TAG, Inc., etc.


                               OPINION

POLLAK, District Judge:

   In these three appeals — Gieg v. DRR, Inc., Wickersham v.
Haselwood Buick-Pontiac Co., and Chaloupka v. SLT/TAG,
Inc. — arising under the Fair Labor Standards Act (“FLSA”),
29 U.S.C. § 201 et seq., the principal question we are asked
to determine is whether finance and insurance managers of
retail automobile dealerships, who are compensated almost
exclusively by commission, are entitled to overtime pay for
hours worked beyond the standard 40-hour workweek pursu-
ant to section 7(a) of the FLSA, 29 U.S.C. § 207(a). Section
207(a) provides that, with certain exceptions, employers in
interstate commerce must pay employees overtime of at least
one and one-half times their regular rate of pay for any time
worked in excess of 40 hours a week.1 Section § 207(i), how-
ever, exempts employers from paying overtime to “any
employee of a retail or service establishment” if the employ-
ee’s regular rate of pay is more than one and one-half times
the statutorily prescribed minimum wage and if “more than
  1
    29 U.S.C. § 207(a)(1) Maximum hours, employees engaged in inter-
state commerce:
      Except as otherwise provided in this section, no employer shall
      employ any of his employees who in any workweek is engaged
      in commerce or in the production of goods for commerce, or is
      employed in an enterprise engaged in commerce or in the produc-
      tion of goods for commerce, for a workweek longer than forty
      hours unless such employee receives compensation for his
      employment in excess of the hours above specified at a rate not
      less than one and one-half times the regular rate at which he is
      employed.
                         GIEG v. DRR, INC.                        5343
half his compensation for a representative period (not less
than one month) represents commissions on goods or services.”2
The three appeals — two from the District Court of Oregon,
and one from the District Court of Washington — raise
largely identical issues and arguments, and hence were con-
solidated for oral argument.

   In each case, the District Court, while recognizing that an
automobile dealership is a “retail or service establishment,”
concluded that a finance and insurance manager, who handles
financing and insurance aspects of the sale of an automobile,
is not engaged in the dealership’s retail activity and hence is
not an employee for whom the employer can claim exempt
status. Accordingly, in all three instances, the District Court
granted summary judgment for the plaintiff employees,
awarding overtime payments. Each dealership has appealed.3
We reverse.

                         BACKGROUND

   The facts of each case are essentially undisputed. Appel-
lants are retail automobile dealerships that sell or lease new
  2
   29 U.S.C. § 207(i) Employment by retail or service establishment:
      No employer shall be deemed to have violated subsection (a) of
      this section by employing any employee of a retail or service
      establishment for a workweek in excess of the applicable work-
      week specified therein, if (1) the regular rate of pay of such
      employee is in excess of one and one-half times the minimum
      hourly rate applicable to him under section 206 of this title, and
      (2) more than half his compensation for a representative period
      (not less than one month) represents commissions on goods or
      services.
   3
     The appeals in Gieg and Wickersham are supported by amici briefs
from the Secretary of Labor and the National Automobile Dealers Associ-
ation. The National Federation of Independent Business Legal Foundation,
the National Independent Automobile Dealers Association, Recreation
Vehicle Dealers Association, and the Marine Retailers Association of
America joined the latter brief.
5344                      GIEG v. DRR, INC.
and used vehicles to their customers. Appellees were each
employed by appellants as finance and insurance managers.4
Their duties in this capacity included verifying information
about the terms of the transactions agreed upon between the
customer and the sales staff and inputting that information
into a computer; completing the necessary bank and Depart-
ment of Motor Vehicles (“DMV”) forms; and obtaining the
customer’s signature on the paperwork. Appellees sold insur-
ance policies to facilitate continuing payment for the vehicle
in case of illness, disability, or death. They also sold extended
warranties, alarm systems, and paint and fabric protection
packages to dealership customers. Appellees were compen-
sated almost exclusively through commissions on the prod-
ucts they sold. None of the appellees earned any commission
from the sale or lease of the vehicle itself. The factual and
procedural history of Gieg is set out in the text below. For the
relevant histories of the companion cases, Wickersham and
Chaloupka, see infra notes 8 and 9.

(A)    Gieg

   Between June 10, 1998 and September 23, 1998, appellee
Jerry Gieg was employed by Courtesy Ford as a “Finance
Writer.” During the three and a half months he worked for
Courtesy Ford, Gieg earned $24,025.16 in commissions. On
an hourly basis, his compensation each month markedly
exceeded one and one-half times the prescribed minimum
wage.

   This is the second time Gieg’s claim has been before this
Court. On December 15, 1998, Gieg filed this FLSA action
against Courtesy Ford and its manager, Woody Howarth, in
the District Court for the District of Oregon seeking overtime
  4
   Gieg’s official title was “Finance Writer.” Wickersham’s title was “Fi-
nance Manager.” Each of the Chaloupka appellees was a “Finance and
Insurance Manager.” Despite differing titles, all appellees in the three
cases had similar job descriptions and duties.
                           GIEG v. DRR, INC.                          5345
wages under § 207(a). The District Court granted partial sum-
mary judgment in favor of defendants on the ground that
Gieg’s claim was barred by § 213(b)(10)(A), which excludes
from overtime eligibility “any salesman, partsman, or
mechanic primarily engaged in selling or servicing automo-
biles, trucks, or farm implements, if he is employed by a non-
manufacturing establishment primarily engaged in the busi-
ness of selling such vehicles or implements to ultimate purchas-
ers.”5 On appeal, this Court reversed on the ground that an
employee whose primary duties were selling financing and
warranties did not qualify as a vehicle “salesman” within the
§ 213(b)(10)(A) exemption6 and remanded the case for further
proceedings. Gieg v. Howarth, 244 F.3d 775 (9th Cir. 2001).

  On remand, Courtesy Ford and Howarth moved for sum-
mary judgment under § 207(i), claiming that the dealership
was exempt from the Act’s overtime provisions because: (1)
Gieg was an employee of a retail automobile dealer; (2) his
regular rate of pay exceeded 150% of the federal minimum
wage in 1998; and (3) more than half of his compensation
  5
     This exception is independent of § 207(i) and does not depend on
whether the salesmen, partsmen, or mechanics are compensated on a com-
mission basis.
   6
     This Court held, “By its terms, the exemption plainly applies only to
the sales and servicing of automobiles; the language does not apply to
commissions based on insurance sales or the procurement of financing.”
Gieg v. Howarth, 244 F.3d 775, 776 (9th Cir. 2001). This conclusion was
based, in large part, on the fact that prior to the adoption of the present
language in 1966, the Act exempted “any employee of a retail or service
establishment which is primarily engaged in the business of selling auto-
mobiles, trucks, or farm implements” from both minimum wage and over-
time requirements. 29 U.S.C. § 213(a)(19) (1964) (emphasis added). The
1966 amendments repealed the inclusive phrase “any employee” and
replaced it with the current language which restricts the exemption to “any
salesman, partsman, or mechanic primarily engaged in selling or servicing
automobiles. . . .” Pub. L. No. 89-601, §§ 209(b), 212(a) (1966). Thus, this
Court held, “we must presume that in the passage of the 1966 amend-
ments, Congress intended to narrow significantly the reach of the automo-
bile dealership employee exemption.” Gieg, at 776-77 (9th Cir. 2001).
5346                     GIEG v. DRR, INC.
represented commissions from the sale of goods and services.
Gieg filed a cross-motion for summary judgment, claiming
§ 207(i) does not apply to the dealership’s finance employees.

   On February 14, 2003, the District Court entered an opin-
ion and order granting Gieg’s cross-motion for summary
judgment with respect to his FLSA overtime claim. The Dis-
trict Court concluded that “invoking the Section 207(i)
exemption requires a clear showing that more than half of an
employee’s compensation represents commissions on retail
goods and services, and not all goods and services as long as
they are sold by a retail or service establishment.” Gieg v.
DRR, Inc., No. 98-1563, 2003 WL 21087602 at *4 (D. Or.
March 14, 2003) (emphasis in original). In reaching this con-
clusion, the court observed that FLSA exemptions are to be
narrowly construed. Citing Mitchell v. Kentucky Fin. Co., 359
U.S. 290 (1959), the District Court also noted, “the Supreme
Court has held that finance companies, insurance brokerages
and claim adjusters all lack a retail ‘concept.’ . . . Since the
duties of such [finance] employees fall outside the scope of
the employers’ retail or service business, those employees
therefore also fall outside of any FLSA exemption that is
based upon the employers being a retail or service establish-
ment. ” Gieg, 2003 WL 21087602, at *5.

   On March 17, 2003, the Department of Labor (“DOL”)
issued an opinion letter concluding that § 207(i) excludes
finance and insurance salespersons employed by a retail auto-
motive dealership from FLSA overtime eligibility.7 The opin-
ion letter concluded that “employee duties are irrelevant” if
other requirements of the exemption are met. On March 21,
2003, Courtesy Ford and Howarth filed a motion for reconsid-
eration in light of the DOL opinion letter. The District Court
denied the motion and entered an order finding Courtesy Ford
and Howarth liable to Gieg for overtime wages.
  7
   The Secretary of Labor’s amicus brief submitted in Gieg and Wicker-
sham further elaborates the Department’s position.
                           GIEG v. DRR, INC.                           5347
  Footnotes 8 and 9 summarize the quite similar facts
and the pertinent procedural histories of Wickersham8 and
   8
     Appellee Joseph Wickersham was employed by Haselwood Buick-
Pontiac Company as a “Finance Manager” from September 29, 2000
through September 21, 2001. During that time, he earned $94,915.57.
Ninety-nine percent of Wickersham’s compensation was based on com-
missions from the contracts he sold. It is undisputed that Wickersham’s
compensation each month exceeded the overtime rate required by 207(i).
Furthermore, the District Court held that, as an automobile dealership,
Haselwood qualifies as a “retail or service establishment.”
   Wickersham filed suit against Haselwood in the District Court for the
District of Washington in October 2001, bringing overtime and minimum
wage claims under both the FLSA and Washington state law. The parties
filed cross-motions for summary judgment. On August 16, 2002, the Dis-
trict Court issued an order in which it granted Wickersham’s motion for
summary judgment as to the overtime claim, granted Haselwood’s motion
for summary judgment as to the federal minimum wage claim, and dis-
missed Wickersham’s state law claims.
    With respect to the overtime claim, the court agreed that Haselwood
was a “retail or service establishment,” but concluded that § 207(i) did not
apply because Wickersham “was not employed in the activities within the
scope of Defendant’s business.” Wickersham v. Haselwood Buick-Pontiac
Co., No. 01-5557, 2002 WL 32152269 at *5 (W.D. Wash. August 16,
2002) (citing 29 C.F.R. § 779.308 and Davis v. Goodman Lumber Co.,
133 F. 2d 52 (4th Cir. 1943)). The District Court further reasoned, “The
term ‘retail or service establishment’ does not encompass establishments
in industries lacking a retail concept. 29 C.F.R. § 779.316. Among those
businesses that lack a retail concept are credit companies, insurance com-
panies, including insurance brokerage, agents and claims adjustment
offices, and finance companies.” Id. at *5 (citing Mitchell v. Kentucky Fin.
Co., 359 U.S. 290 (1959)). The court found, “As part of his duties Plaintiff
would try to persuade the customer to obtain financing through either the
vehicle manufacturer’s financing arm or some commercial financing insti-
tution with which Defendant had a relationship. Plaintiff was also respon-
sible for selling insurance polices and insurance products to the customer.
. . . Such activities are more akin to a finance writer or an insurance agent
than they are to an automobile salesman. Thus, Plaintiff’s job duties
lacked a retail concept.” Id.
  Haselwood subsequently filed a “motion for revision” in light of the
March 17, 2003 DOL opinion letter, which the District Court denied.
Haselwood now appeals the summary judgment order.
5348                       GIEG v. DRR, INC.
of Chaloupka.9
  9
   The appellees in Chaloupka are four plaintiffs who brought consoli-
dated claims for overtime wages against SLT/TAG, Inc. and Asbury Auto-
motive Oregon LLC. Asbury Automotive Oregon LLC owns automobile
dealerships in the Portland area formerly owned by the Thomason Auto
Group. At various times, each appellee was employed by a Thomason
dealership as a “Finance and Insurance Manager.” Appellees were com-
pensated exclusively on a commission basis. In 2000, Lisa Bennett earned
more than $92,000, John Inselman earned $58,000, and Bradley Hayes
earned almost $70,000. On an hourly basis, their compensation each
month exceeded the overtime rate required by 207(i).
   The claims of these four appellees were consolidated in the district
court over time. On January 14, 2002, a state-court action filed by Bennett
seeking overtime wages under both FLSA and state law was removed to
the District Court for the District of Oregon. On June 6, 2002, a state-court
action filed by Martin Chaloupka and Inselman, asserting overtime claims
essentially identical with those asserted by Bennett, was removed to the
District Court for the District of Oregon. On August 5, 2002, Hayes filed
suit in the District Court for the District of Oregon asserting similar
claims.
   In Bennett’s suit, the dealership moved for summary judgment under
§ 207(i) claiming that it was exempt from the Act’s overtime provisions.
Bennett filed a cross-motion for partial summary judgment. On February
10, 2003, a Magistrate Judge issued findings and a recommendation that
defendant’s motion should be denied and Bennett’s motion should be
granted. The Magistrate Judge interpreted § 207(i) as limited to employees
earning commissions on retail goods and services. In reaching this conclu-
sion, the Magistrate Judge explained, “While defendants’ interpretation is
not without some logic, I am mindful of the admonition that exemptions
from the FLSA overtime requirement are to be narrowly construed and
their application limited to those plainly and unmistakably within their
terms and spirit.”
   On March 17, 2003, the DOL issued its opinion letter concluding that
§ 207(i) exempts finance and insurance salespersons employed by a retail
automotive dealership from the FLSA’s overtime requirements. Finding
the opinion letter “not persuasive,” the District Court adopted the Magis-
trate Judge’s findings and recommendations.
   The Magistrate Judge presiding over Bennett’s case consolidated Cha-
loupka and Inselman’s case with Hayes’ case for the purpose of summary
judgment. The parties in these consolidated cases then filed cross-motions
for summary judgment. On May 20, 2003, the Magistrate Judge issued
findings and recommendations that the dealerships’ motions should be
                           GIEG v. DRR, INC.                         5349
                   STANDARD OF REVIEW

   Interpretations of the FLSA and its regulations are ques-
tions of law, and appellate courts review district court inter-
pretations de novo. See, e.g., Magana v. Commonwealth of
the Northern Mariana Islands, 107 F.3d 1436, 1438 (9th Cir.
1997) (“We review de novo district court decisions regarding
exemptions to the Fair Labor Standards Act”). We also review
a district court’s grant or denial of summary judgment de
novo. United States v. Alameda Gateway, Ltd., 213 F.3d
1161, 1164 (9th Cir. 2000). Viewing the evidence in the light
most favorable to the nonmoving party, an appellate court
must determine whether there are any genuine issues of mate-
rial fact and whether the district court correctly applied the
relevant substantive law. Lopez v. Smith, 203 F.3d 1122, 1131
(9th Cir. 2000) (en banc).

                            DISCUSSION

   [1] The Fair Labor Standards Act (“FLSA”), 29 U.S.C.
§ 201 et seq., was passed to regulate the wage, hour, and
working conditions of American employees. The Act pro-
vides, inter alia, that, as a general matter, employers must pay
employees overtime of at least one and one-half times their

denied and the employees’ motions should be granted. The District Court
subsequently adopted these findings and recommendations.
   On September 10, 2003, the three cases were consolidated for a trial on
damages. Following trial, the District Court entered findings and conclu-
sions determining that Bennett, Inselman, and Hayes were entitled to over-
time wages and state-law penalties, but not liquidated damages. On
November 6, 2003, the District Court entered judgment in favor of plain-
tiffs. (The court found that the dealerships’ violation of the FLSA was not
willful and, therefore, the two-year statute of limitations applied. Since
Chaloupka had no overtime within that period, the court awarded him no
damages). On November 18, 2003, the court entered an amended judg-
ment awarding Bennett, Inselman, and Hayes monetary damages and
attorneys fees. The dealerships now appeal.
5350                  GIEG v. DRR, INC.
regular rate of pay for any hours worked in excess of 40 hours
a week. 29 U.S.C. § 207(a)(1).

   [2] Certain employees, however, are not covered by the
overtime provisions. Employers have the burden of demon-
strating that a particular employee, or category of employees,
is not within the ambit of the overtime provision. Donovan v.
Nekton, Inc., 703 F.2d 1148, 1151 (9th Cir. 1983) (per
curiam). Exemptions from the Act are to be “narrowly con-
strued, giving due regard to the plain meaning of statutory
language and the intent of Congress.” Id. Section 207(i)
excludes from coverage an employee of “a retail or service
establishment” whose regular rate of pay is more than one and
one-half times the minimum wage if “more than half his com-
pensation for a representative period (not less than one
month) represents commissions on goods or services.” The
legislative purpose of the § 207(i) exemption is discussed in
29 C.F.R. § 779.414, which states:

    Section 7(i) was enacted to relieve an employer from
    the obligation of paying overtime compensation to
    certain employees of a retail or service establishment
    paid wholly or in greater part on the basis of com-
    missions. These employees are generally employed
    in so-called “big ticket” departments and those
    establishments or parts of establishments where
    commission methods of payment traditionally have
    been used, typically those dealing in furniture, bed-
    ding and home furnishings, floor covering, draperies,
    major appliances, musical instruments, radios and
    television, men’s clothing, women’s ready to wear,
    shoes, corsets, home insulation, and various home
    custom orders. There may be other segments in
    retailing where the proportionate amount of commis-
    sion payments would be great enough for employees
    employed in such segments to come within the
    exemption. Each such situation will be examined,
    where exemption is claimed, to make certain the
                           GIEG v. DRR, INC.                         5351
       employees treated as exempt from overtime compen-
       sation under section 7(i) are properly within the stat-
       utory exclusion.

   The policy justification for the exemption thus appears to
have more to do with the employee’s compensation than with
the exact nature of the goods or services sold. The regulation
exempts employers who employ well-compensated employ-
ees earning commissions in “big ticket” departments from
paying overtime. Appellants and amici argue that selling “big
ticket” items, such as automobiles, does not lend itself to
being compensated on an hourly basis. As the National Auto-
mobile Dealers Association (“NADA”) states in its amicus
brief filed in support of appellants in Gieg and Wickersham,
“Unlike most other workplaces, where the workload is rela-
tively predictable and lends itself to shift work and overtime,
the work at ‘big ticket’ item dealerships is driven by the
vagaries of consumer demand and is inherently unpredict-
able.” See Mechmet, 825 F.2d at 1176-77 (explaining why the
policies behind the FLSA overtime provisions would not be
served by applying them to commissioned employees selling
“big ticket” items).

  [3] In the cases at bar, in order to qualify for the § 207(i)
exemption, the employers were required to show that: (1)
each employer was “a retail or service establishment”; (2)
each plaintiff-employee’s regular rate of pay was more than
one and one-half times the minimum wage;10 and (3) more
  10
    The appellees in Chaloupka argue that the dealerships have not pro-
vided sufficient proof that their regular rate of pay was more than one and
one-half times the minimum wage. In particular, the appellees contend that
the evidence that their compensation exceeded one and one-half times the
minimum wage is based only on an average and does not establish that
such pay was provided for every week of work. The term “regular rate of
pay” is defined in 29 C.F.R. § 779.419(b) as “the hourly rate actually paid
to the employee for the normal, nonovertime workweek for which he is
employed.” Appellees argue that the FLSA does not allow averaging and
that each week must stand alone.
5352                       GIEG v. DRR, INC.
than half of plaintiffs’ compensation “represent[ed] commis-
sions on the sale of goods or services.” 29 U.S.C. § 207(i).
The key dispute in these appeals regards whether, with respect
to the third element, the § 207(i) exemption is limited to
employees who earn commissions on retail goods or services,
as the District Courts held, or whether it is meant to apply to
all commission-earning employees of a retail or service estab-
lishment who meet the compensation requirements. However,
both Gieg and Chaloupka raise preliminary issues bearing on
whether the dealerships in those cases qualify as “retail or ser-
vice establishment[s].” We will address these preliminary

   In their submissions to the District Court, the Chaloupka dealerships
provided information on each appellee’s hourly rate. The appellees do not
challenge those figures. Instead, they argue that the figures should have
been “hourly wage” and not “regular hourly rate.” In their response to
Defendants’ Consolidated Concise Statement of Material Facts, which
listed Chaloupka and Inselman’s “regular rate of pay” over the relevant
time period, appellees wrote, “Accept; except that ‘regular rate’ or ‘regular
hourly rate’ should read ‘hourly wage’ as stated in appellees’ respective
complaints.” Appellees rely on this response to support the proposition
that they did not stipulate to the regular hourly rate, but “only as to an
hourly wage, averaged over an unidentified time period.” Even though
appellees used the same calculations in their complaints, they now argue
that the calculation does not satisfy the proof required to show that they
were paid the required wage.
   Appellees did not make this argument in the District Court, which
treated the issue as undisputed. An appellate court will not consider argu-
ments not first raised before the district court unless there are exceptional
circumstances. In re Prof’l Inv. Props. of Am., 955 F.2d 623, 625 (9th Cir.
1992). The Magistrate Judge presiding over Bennett’s case stated, “It is
undisputed that plaintiff’s ‘regular rate of pay’ substantially exceeded one
and one-half times the minimum wage, thereby satisfying the first condi-
tion in Section 7(i) for establishing the applicability of the exemption.”
Bennett v. SLT/TAG Inc. et al., No. CV02-65-HU (Feb. 10, 2003) p. 13,
n.3. The District Court adopted these findings and recommendations.
None of the other Chaloupka plaintiffs raised this issue prior to appeal.
Because there are no exceptional circumstances to justify appellees’
attempt to raise the argument for the first time on appeal, we regard the
argument as waived.
                       GIEG v. DRR, INC.                       5353
issues in Sections A and B of this opinion before turning to
the central dispute in Section C.

A. Did Courtesy Ford qualify as a “retail or service
establishment” under § 207(i)?

   Gieg contends that Courtesy Ford has not shown that it
qualified as a “retail or service establishment” within the
meaning of § 207(i). The § 207(i) definition of “retail or ser-
vice establishment” derives from former 29 U.S.C.
§ 213(a)(2). Prior to being repealed in November 1989,
§ 213(a)(2) excluded from minimum wage and overtime pay:

    [A]ny employee employed by any retail or service
    establishment . . . if more than 50 per centum of such
    establishment’s annual dollar volume of sales of
    goods or services is made within the State in which
    the establishment is located, and such establishment
    is not in an enterprise described in section 203(s)(5)
    of this title. A “retail or service establishment” shall
    mean an establishment 75 per centum of whose
    annual dollar volume of sales of goods or services
    (or of both) is not for resale and is recognized as
    retail sales or services in the particular industry.

When Congress enacted section 207(i) in 1966, it intended the
term “retail or service establishment” to have the same mean-
ing. 29 C.F.R. § 779.411. Although § 213(a)(2) was later
repealed, courts have continued to apply its definition of “re-
tail or service establishment” to Section 207(i). See, e.g.,
Reich v. Delicorp, Inc., 3 F.3d 1181, 1183 (8th Cir. 1993).

   [4] Gieg argues that Courtesy Ford has not proved that it
met the 75% volume requirement to qualify as a “retail or ser-
vice establishment,” and that Courtesy Ford is unable to do so
because the FLSA does not recognize the majority of Gieg’s
sales as “retail” within the industry. While it is true that auto-
mobile finance and insurance sales are considered non-retail
5354                       GIEG v. DRR, INC.
for the purpose of the FLSA, see Mitchell v. Kentucky Fin.
Co., 359 U.S. 290 (1959), that fact is of no consequence here.
First, for the purpose of determining whether, during Gieg’s
period of employment, Courtesy Ford was a “retail or service
establishment,” the relevant inquiry is not whether the partic-
ular transactions on which Gieg worked should be deemed to
be retail, but whether Courtesy Ford’s sales of automobiles
should be deemed to be retail. The inquiry focuses on the
retail sales of an “establishment” as a whole and not on the
individual activity of a particular employee. It is uncontested
that automobile sales are recognized as retail sales by the
industry and by the FLSA. Second, Courtesy Ford excluded
its finance and insurance sales when calculating the 75%
annual dollar volume figures. Excluding all proceeds from
finance and insurance sales, the dealership met the 75% vol-
ume sales threshold to qualify as a retail establishment.

B. Did the dealerships in Chaloupka qualify as “retail or
service establishments” under § 207(i)?

  (1) Are individual automobile leases “sales” that are not
  “for resale”?

   A significant portion of the transactions completed by the
dealerships in Chaloupka involved arranging long-term auto-
mobile leases for individual dealership customers. These indi-
vidual leases typically ranged from 24 to 66 months, during
which time the lessee agreed to insure and maintain the vehi-
cle and not to resell or otherwise dispose of it. The appellees
in Chaloupka contend that the dealerships have not proved
that they meet the 75% volume requirement to qualify as “re-
tail or service establishment[s]” because these leases either (1)
did not constitute “sales”11 or (2) must be disregarded as sales
   11
      The term “sale” is defined in 29 U.S.C. § 203(k) to include “any sale,
exchange, contract to sell, consignment for sale, shipment for sale, or
other disposition.” The dealerships argue that this definition should be
read to include leases of automobiles to individual customers as “other
disposition[s].”
                            GIEG v. DRR, INC.                           5355
“for resale.”12 The dealerships have admitted that they cannot
meet the 75 percent volume threshold unless the dollar vol-
ume earned from leases is included in the calculation.

   The Fifth Circuit has addressed both parts of this inquiry.
In Acme Car & Truck Rentals, Inc. v. Hooper, 331 F.2d 442
(5th Cir. 1964), that court considered whether a company that
rented and leased automobiles and trucks to commercial,
industrial, and individual users qualified as a “retail or service
establishment” that was exempt from paying employees over-
time under former § 213(a)(2). In particular, the court exam-
ined whether “fleet leasing,” which represented a significant
portion of the defendant’s business, constituted a “retail sale”
for the purpose of the exemption. Id. at 446-48. The court
held that because the defendant failed to establish that fleet
leasing was retail in nature, those proceeds could not be
counted toward the 75% threshold. Id. at 447-48. In reaching
that determination, however, the Fifth Circuit stated, “It is
unquestionable that fleet leasing is a sale or service which is
not for resale. But due to the wholesale nature of that transac-
tion, it is questionable whether it is recognized as retail in the
industry.” Id. at 446. Here, where we are dealing not with
“fleet leasing,” a form of “wholesale . . . transaction,” but
with individual leases, there is no dispute that the leases are
retail; the only question is whether leases constitute “sales”
that are not “for resale.” Acme addressed the latter question
directly — “leasing is a sale or service which is not for
resale.” Id. We agree. The Acme statement is consistent with
rulings that a real estate lease is a “sale” within the meaning
of the Act. See Brennan v. Dillion, 483 F.2d 1334 (10th Cir.
1973) (rental of apartment space is a “sale” or “disposition”
as defined by § 203(k), the definitional section quoted in foot-
  12
    As noted supra pp. 5353, former § 213(a)(2), whose definition
remains controlling, defines the term “retail or service establishment” as
meaning an establishment “75 per centum of whose annual dollar volume
of sales of goods or services (or of both) is not for resale and is recognized
as retail sales or services in the particular industry.”
5356                       GIEG v. DRR, INC.
note 13, supra); Wirtz v. First Nat’l. Bank & Trust Co., 365
F.2d 641, 645 (10th Cir. 1966) (rental of office space falls
within § 203(k) definition of “sale”). Furthermore, while the
Act does not define the term “resale,” we agree with appel-
lants that the distinguishing characteristic of a “sale for
resale” is that the sale is made for the purpose of immediate
resale. The Department of Labor’s regulations support this
interpretation. As 29 C.F.R. § 779.331 explains:

       A sale is made for resale where the seller knows or
       has reasonable cause to believe that the goods or ser-
       vices will be resold, whether in their original form,
       or in an altered form, or as a part, component or
       ingredient of another article. . . . Similarly, if at the
       time the sale is made, the seller has no knowledge or
       reasonable cause to believe that the goods are pur-
       chased for the purpose of resale, the fact that the
       goods later are actually resold is not controlling.13

(Emphasis added).

  [5] An automobile lease is not a sale for the purpose of
resale as contemplated by the FLSA. The customer who signs
a retail automobile lease is the intended consumer of that
vehicle. Neither the dealer nor the customer enters into a lease
with the expectation that the vehicle or its parts will be
promptly resold. We therefore conclude that individual auto-
mobile leases are “sales” that are not “for resale” and that the
  13
     The additional guidance regarding “sales for resale” provided in sub-
sequent C.F.R. provisions is instructive. Section 779.332, for example,
points to sales of parts expected to be incorporated into aircraft that will
later be sold, the sale of lumber to furniture or box factories, or the sale
of textiles to clothing manufacturers as sales for resale. Section 779.333
explains, “Goods are sold for resale where they are sold for use as a raw
material in the production of a specific product to be sold, such as sales
of coal for the production of coke, coal gas, or electricity, or sales of
liquefied-petroleum-gas for the production of chemicals or synthetic rub-
ber.”
                      GIEG v. DRR, INC.                     5357
proceeds from these leases may be counted toward the dealer-
ships’ annual dollar volume in order to qualify as “retail or
service establishments” under § 207(i).

C. Is the § 207(i) exemption limited to employees earning
commissions on retail goods or services or does it apply
more broadly to all employees earning commissions on
goods and services?

   While recognizing that an automobile dealership is a “retail
or service establishment” under the FLSA, the District Courts
in the cases under review concluded that a finance and insur-
ance manager, who handles finance and insurance aspects of
the sale of an automobile, is not engaged in the dealership’s
retail activity and hence is not an employee for whom the
employer can claim exempt status. Appellants contend that as
long as the goods and services are sold by a “retail or service
establishment,” the § 207(i) exemption applies to each
commission-earning employee regardless of whether the com-
missions earned derive from retail goods and services. In sup-
port of their position, appellants rely on the wording of
§ 207(i), which contains no language confining the statutory
exemption to commission-earning employees who themselves
sell retail goods and services, and on the Department of Labor
opinion letter and brief adopting this position.

  (1)   The Wording of § 207(i)

  [6] Section 207(i) provides:

    No employer shall be deemed to have violated sub-
    section (a) of this section by employing any
    employee of a retail or service establishment for a
    workweek in excess of the applicable workweek
    specified therein, if (1) the regular rate of pay of
    such employee is in excess of one and one-half times
    the minimum hourly rate applicable to him . . . , and
    (2) more than half his compensation for a representa-
5358                     GIEG v. DRR, INC.
       tive period (not less than one month) represents com-
       missions on goods or services. 29 U.S.C. § 207(i).

By its terms, the § 207(i) exemption applies to “any employ-
ee” of a retail or service establishment who meets the com-
pensation requirements; the exemption is not limited to those
employees who sell retail goods and services.

  (2)     Interpretive Regulations

  [7] Invoking 29 C.F.R. § 779.308, appellees argue that they
do not come within the § 207(i) exception because they are
not employed in activities that are within the scope of the
dealerships’ exempt retail business. Section 779.308 states:

       In order to meet the requirement of actual employ-
       ment “by” the establishment, an employee, whether
       performing his duties inside or outside the establish-
       ment, must be employed by his employer in the work
       of the exempt establishment itself in activities within
       the scope of its exempt business. (See Davis v.
       Goodman Lumber Co., 133 F. 2d 52 (CA-4) (holding
       section 13(a)(2) exemption inapplicable to employ-
       ees working in manufacturing phase of employer’s
       retail establishment); Wessling v. Carroll Gas Co.,
       266 F. Supp. 795 (N.D. Iowa); Oliveira v. Basteiro,
       18 WH Cases 668 (S.D. Texas). See also, Northwest
       Airlines v. Jackson, 185 F. 2d 74 (CA-8); Walling v.
       Connecticut Co., 154 F. 2d 522 (CA-2) certiorari
       denied, 329 U.S. 667;14 and Wabash Radio Corp. v.
       Walling, 162 F. 2d 391 (CA-6)).

  The parties dispute both the applicability and the meaning
of § 779.308. Appellants contend that § 779.308 is without
application to § 207(i); but they also contend that, if
  14
    The citation for Walling v. Connecticut Co. provided in the text of
§ 779.308 is inaccurate. The correct citation is 154 F.2d 552.
                       GIEG v. DRR, INC.                    5359
§ 779.308 is deemed applicable, appellees are employees
engaged “in the work of the exempt establishment itself in
activities within the scope of its exempt business.”

   In support of the contention that § 779.308 does not apply
to § 207(i), appellants point out that (1) § 779.308 is a regula-
tion crafted as a construction of 29 U.S.C. § 213(a)(2), which
has since been repealed, and (2) the regulations that expressly
relate to § 207(i) are 29 C.F.R. §§ 779.411 – 779.421, which
are grouped together under the caption “Employees Compen-
sated Principally by Commissions.” See 29 C.F.R. § 779.410.
(“There are briefly set forth in §§ 779.411 to 779.421 some
guiding principles for determining whether an employee’s
employment and compensation meet the conditions set forth
in section 7(i) [§ 207(i)]”). But the crucial words of § 207(i)
— “any employee of a retail or service establishment” — mir-
ror so closely the cognate words of former § 213(a)(2), which
(subject to certain limitations not pertinent here) excluded
from coverage “any employee employed by any retail or ser-
vice establishment . . . ,” that we think it would be captious
to disregard § 779.308 in construing § 207(i). Moreover, we
note that the Department of Labor’s opinion letter of March
17, 2003, and the Secretary of Labor’s amicus brief, concur
in this view. Accordingly, we think it appropriate to consider
the cases cited in § 779.308 — Davis v. Goodman Lumber
Co.; Northwest Airlines v. Jackson; Wabash Radio Corp. v.
Walling; Wessling v. Carroll Gas Co.; Oliveira v. Basteiro;
and Walling v. Connecticut Co. — with a view to assessing
their pertinence to the scenarios presented in the cases at bar.

   In each of the cases cited in § 779.308, it was held that the
employee or employees in question were not “employed . . .
in the work of the exempt establishment itself in activities
within the scope of its exempt business” and hence were not
excluded from FLSA coverage. Each of the cited cases is,
however, markedly unlike the three cases at bar. Each of the
cited cases involved an employer engaged in a business
endeavor that was truly separate from, and not at all related
5360                        GIEG v. DRR, INC.
to, the exempt business of the establishment. For example,
Davis v. Goodman Lumber Co. involved the applicability of
the § 213(a)(2) exemption to employees of a company that
was primarily engaged in the retail sale of lumber, but which
also had a separate department that manufactured rollers for
cotton mills. The court held that because manufacturing roll-
ers for cotton mills was “separate and distinct” from the com-
pany’s retail lumber yard, the retail and service exemption did
not apply to the employees of the manufacturing business.
133 F.2d at 54. Northwest Airlines v. Jackson addressed
whether a group of Northwest employees working as part of
a government airplane modification project during World War
II, and located in a separate “modification center,” were
exempt from FLSA overtime payments under § 213(b)(3).15 In
denying the exemption, the court found the work done in the
modification center was “so tenuous, negligible, and remote
to defendant’s operation of its commercial airline activities,”
that the exemption did not apply. 185 F.2d at 77. In Wabash
Radio Corp. v. Walling, the court held that a railroad com-
pany that also operated a separate radio-telegraph facility,
which served the public as a whole, could not exempt the
radio employees from overtime under section 213(b)(2)’s
exemption for “any employee of an employer subject to the
provisions of Part I of the Interstate Commerce Act.”16 162
F.2d 393. In Wessling v. Carroll Gas Co. the court held that
a retail propane company that used two back rooms as a ware-
house to store and distribute gas appliances to other affiliate
companies consisted of two separate establishments, “one of
which is exempt and one of which is not exempt.” 266 F.
Supp. at 798. Therefore, a plaintiff employed as ‘cylinder
driver’ who delivered propane bottles, bulk gas, and appli-
  15
      29 U.S.C. § 213(b)(3) excepts from overtime pay requirements “any
employee of a carrier by air subject to the provisions of title II of the Rail-
way Labor Act. . . .”
   16
      The current language of 29 U.S.C. § 213(b)(2) excepts “any employee
of an employer engaged in the operation of a rail carrier subject to part A
of subtitle IV of Title 49 [rail provisions for interstate transportation].”
                       GIEG v. DRR, INC.                   5361
ances in connection with the warehouse operations was not
“employed by” the exempt retail establishment, and hence
was not excluded from overtime coverage under § 213(a)(2).
Id. at 800-801. In Oliveira v. Basteiro, the court held that an
ambulance service operated by a funeral home was a separate
entity that was not exempt as a retail establishment under the
Act. 18 WH Cases at 669. Therefore, an “ambulance helper”
employed by the funeral home was covered by the Act’s over-
time provisions. Id. Finally, in Walling v. Connecticut Co., the
court held that a defendant who operated both electric trolley
cars and a separate power plant could not exempt the power
plant employees from the FLSA overtime provisions under
the exemption for local trolley or motor bus carriers. 154 F.2d
at 553. In rejecting defendant’s literal interpretation of
§ 213(a)(9) as exempting “any employee” of a carrier, the
court explained that the interpretation the defendant advanced
“would mean that, no matter in what business, however extra-
neous to its functioning as a ‘local trolley carrier,’ defendant
engaged, those employed in that extraneous business would
be exempt.” Id.

   [8] It is not simply that the employers in the cases cited in
§ 779.308 contained distinct departments — the departments
were engaged in truly separate business endeavors that were
wholly “extraneous” to the work targeted by the relevant
exemption. In contrast, the appellant dealerships now before
the court are single retail or service establishments. As the
Secretary of Labor aptly puts it in her amicus brief, unlike the
facts in Davis, none of the “dealership[s] here maintained on
its premises separate and distinct business operations in which
the employees in question were engaged. . . . These dealer-
ships do not operate a finance company, insurance company,
or any other separate business. Rather, the duties performed
by the finance officers were an integral, and integrated, part
of their employer’s auto dealership operations as a whole.”

  Appellees make the further argument that finance employ-
ees are not employed “in activities within the scope of its
5362                        GIEG v. DRR, INC.
exempt business” under § 779.308 because finance lacks a
retail concept. In Mitchell v. Kentucky Fin. Co., 359 U.S. 290
(1959), the Supreme Court held that a personal loan company
and “other financial institutions” including banks, insurance
companies, and credit companies were not “retail or service
establishments” within the meaning of former § 213(a)(2)
because “there is no concept of retail selling or servicing in
these industries.” Id. at 295 (citing H.R. Conf. Rep., 95 Cong.
Rec. 14932, U.S. Code Cong. Service 1949, p. 2265). In the
cases at bar, the District Courts relied on Mitchell in conclud-
ing that the 207(i) exception only applies to retail employees
who earn commissions on retail goods and services. See also,
29 C.F.R. § 779.317 (listing finance companies and insurance
agencies as establishments that lack a “retail concept”).

   Mitchell is inapposite. As we have noted, in Mitchell the
Court was addressing the question of whether the employer
and “other financial institutions” were “retail or service estab-
lishments.” In contrast, the District Courts have found the
defendant employers — the several automobile dealerships —
to be retail establishments, and we have concurred in those
findings. Thus, the remaining question presented here is not
the Mitchell question. The remaining question is whether
commission-compensated employees of a retail establishment
whose commissions derive from the financing and insurance
aspects of retail sales are for that reason to be regarded as out-
side the scope of the retail enterprise and hence entitled to
overtime payments.17
  17
     Appellees cite 29 C.F.R. § 779.321(a) for the proposition that the con-
cept of retailability must apply to particular transactions as well as to the
establishment as a whole. (“As to each particular sale of goods or services,
an initial question that must be answered is whether the sales of goods or
services of the particular type involved can ever be recognized as retail.”)
This regulatory provision, however, simply addresses the question of
which sales can be applied to the 75% annual volume sales threshold to
determine which establishments meet the “retail or service establishment
definition” originally set forth in former § 213(a)(2). Section § 779.321(a)
is irrelevant to our present inquiry for the same reason that Mitchell is: the
                           GIEG v. DRR, INC.                           5363
   Finally, in support of their contention that the finance/
insurance aspects of their work take them outside the compre-
hensive wording of § 207(i) — “any employee of a retail or
service establishment” — appellees invoke 29 C.F.R.
§ 779.369. Section 779.369 excluded burial insurance
employees of funeral homes from the former § 213(a)(2)
exemption on the ground that they produced “non-retail”
income and were, therefore, not employed in the scope of the
exempt establishment under § 779.308.18

   Section 779.369 provides, in pertinent part:

     (a) General. A funeral home establishment may qual-
     ify as an exempt retail or service establishment under
     section [§ 213(a)(2)] of the Act if it meets all the
     requirements of that section. Where the establish-

relevant question is not whether finance and insurance sales can be
counted as retail sales for the purpose of determining whether a business
qualifies as a “retail or service establishment,” but whether employees
selling insurance and other financing for a recognized retail establishment
are included in the § 207(i) exemption.
   18
      Section 779.369 comes under the heading “Classification of Sales and
Establishments in Certain Industries.” As 29 C.F.R. § 779.353 explains:
    The general principles governing the application of the
    [§ 213(a)(2)] and [§ 213(a)(4)] exemptions are explained in detail
    earlier in this the subpart. It is the purpose of the following sec-
    tions to show how these principles apply to establishments in cer-
    tain specific industries. In these industries, the Divisions have
    made special studies, held hearings or consulted with representa-
    tives of industry and labor, to ascertain the facts. Based upon
    these facts, the following determinations have been made as to
    which sales or establishments are, and which are not, recognized
    as retail in the particular industry.
In this light, § 779.369 may be seen as a specific case study of how the
former § 213(a)(2) exemption applied to funeral homes. In its opinion let-
ter and brief, the Department of Labor opines that § 779.308 applies to
§ 207(i), but is silent as to § 779.369. We are prepared to accept that, like
§ 779.308, § 779.369 survives the repeal of § 213(a)(2).
5364                   GIEG v. DRR, INC.
    ment meets these requirements generally all employ-
    ees employed by the establishment will be exempt
    except any employees who perform any work in con-
    nection with burial insurance operations (see para-
    graph (b)). . . .

    (b) Burial insurance operations. There is no retail
    concept applicable to the insurance business (see
    § 779.317). Burial associations which enter into
    burial insurance contracts are generally regulated by
    the State and the regulations governing such associa-
    tions are included in State statutes under Insurance.
    The contracts issued are very similar in form and
    content to ordinary life insurance policies. Income
    received from such operations is non-retail income
    and employees engaged in such work are not
    employed in work within the scope of the retail
    exemption (see § 779.308).

   Appellees argue, by way of analogy, that just as funeral
home employees who sell burial insurance are not considered
to be employed in the scope of an exempt retail establishment
because they sell non-retail products, so too are automobile
dealership employees who sell insurance and financing. How-
ever, as § 779.369 indicates, the “burial insurance contracts”
issued by the “burial insurance operations” of a “funeral home
establishment” are closely akin to “ordinary life insurance
policies.” Seen in this light, it is readily understandable that,
in promulgating 29 C.F.R. § 779.369, which classified burial
associations, the Department of Labor perceived the “burial
insurance operations” as being remote from the central busi-
ness of a “funeral home establishment” in much the same way
that the manufacture of rollers for cotton mills was found by
the Fourth Circuit to be “separate and distinct” from the retail
sale of lumber in Davis v. Goodman Lumber Co. In contrast,
the finance and insurance packages sold by appellees are an
integral part of the dealerships’ retail business.
                      GIEG v. DRR, INC.                  5365
                      CONCLUSION

   For the reasons stated above, the judgments of the District
Courts are REVERSED and the three cases are REMANDED
to the District Courts for further proceedings consistent with
this opinion.
