The Outside Sales Exemption
The conclusion to my mini-series on navigating exemptions
We’ve arrived at the end of this mini-series on the FLSA’s most common exemptions from its overtime requirements and now examine what is known as the “outside sales employee” exemption. This is in many ways the most straightforward of the “white collar” exemptions. Unlike the other exemptions we’ve covered, there is no requirement that an employee be compensated either on a salary or fee basis at a minimum amount or rate per week or hour. The applicability of this exemption will rise or fall strictly based upon the nature of an employee’s duties.
To qualify for the outside sales employee exemption, both of the following tests must be met:
• The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
• The employee must be customarily and regularly engaged away from the employer’s place or places of business.
The definition of “primary duty” in the first test is the same as required in the other exemptions. That is, “looking at the character of the employee’s job as a whole”, the types of duties described must be “the principal, main, major or most important duty that the employee performs.” Guidance from the Department of Labor (DOL) includes a relatively wide range of activities that would satisfy this first test, assuming they are a sufficiently significant part of an employee’s overall responsibilities.
The second test would preclude, for example, an employee who conducts all of her sales activity by telephone or the Internet from the main office of the business or even from the employee’s home. According to the DOL, the phrase “customarily and regularly” means “greater than occasional but less than constant.” In other words, some amount of time in the office each workweek will not destroy the exemption, but employers should try to keep it to a minimum. In addition, “outside sales” must personally take place at a client or customer’s place of business, or home if door-to-door sales, and may only be followed up by contact by mail, telephone calls or the Internet.
The DOL offers the example of a driver salesman, who both sells and delivers products, as a position for which this exemption may or may not apply. It will depend upon a number of factors, including, among others, whether the amount of products delivered are predetermined by contracts arranged by other employees. The bottom line in this situation is that the employee’s primary duty must be the making of sales and not simply delivering the products.
The information contained in this post should not be considered legal advice, nor does it establish an attorney-client relationship between the author and the reader. Readers should to seek the advice of legal counsel before taking any action based upon the content of this post.
