Outside Salesperson Exemption
The FLSA exempts any employee working in the capacity of outside salesperson. The outside sales exemption generally applies to any employee:
- whose primary job duty is making sales and
- who customarily and regularly works outside their employer’s place of business.
Congress chose to exempt outside salespersons from the FLSA’s protections because such employees typically work independently from their employers. Employers usually do not place restrictions on the amount of time an outside salesperson may work. Consequently, an outside salesperson can earn as much or as little, within the range of their ability, as their ambition dictates. In lieu of overtime, an outside salesperson ordinarily receives commissions as extra compensation. From a practical standpoint, Congress felt that it would be too difficult for employers to track how many hours an outside salesperson works per week since individuals in such positions spend most of their time working without supervision outside of the office.
Let’s look at the two requirements in greater detail:
Primary Duty Requirement
The first test to determine whether the outside salesperson exemption applies to an employee focuses on whether the employee’s primary duty involves sales. The term “sale” includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition, including the transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property.
Courts look to a variety of factors to determine whether an employee’s primary job duty involves sales, including whether the employee:
- must solicit new business;
- receives specialized sales training;
- was hired and denominated as a salesperson;
- whether the position was advertised as a sales position
- receives commission compensation; and
- lacks direct or constant supervision.
In deciding whether an employee is an outside salesperson, courts look beyond labels and descriptions and also inquire into the particular facts of the actual work performed.
The “Outside” Requirement
The second requirement focuses on the place where the salesperson works. For this exemption to apply, a salesperson must spend most of their workday outside of their employer’s place of business. For example, an exempt outside salesperson likely spends most of the workday traveling and meeting with existing or potential customers outside of the office. An outside salesperson may spend time working in the office without losing their exempt status, but only if such time is spent performing duties that are “incidental” to their outside sales activities, such as writing sales reports, planning itineraries, and attending sales meetings.
Employers have, in the past, tried to avoid their overtime obligations by misclassifying sales employees who spend most of their time at work inside their employer’s office as exempt outside salespersons. Inside sales employees generally do not qualify for the outside-sales exemption. Employees in positions that involve making sales calls and email sales from their employer’s office or remote locations (including “work-from-home” situations) are most likely entitled to the FLSA’s overtime and minimum-wage protections. This is true regardless of whether the employer pays inside-sales employees a sales commission.
Given the susceptibility of job titles and descriptions to employer manipulation, courts give them little weight in determining an employee’s exempt status. Instead, courts must focus on actual day-to-day activities of the employee rather than more general job descriptions contained in resumes, position descriptions, and performance evaluations.