What Do You Know About The Outside Sales Exemption?

By Linda H. Evans,
Senior Associate.

 

The Fifth Circuit recently addressed one of the lesser used exemptions under the Fair Labor Standards Act (FLSA) … outside sales.  Reminder: Any employee who has been properly categorized as exempt, is exempt from the minimum wage and overtime hour requirements.

 

Meza was an employee who worked for about a year as a route salesman for a company that sells and delivers food and beverage items to convenience stores.  He was paid a weekly salary, plus commissions.  As a route salesman, he generally worked about 72 hours a week and his wage averaged $6.66 per hour.  The employee filed suit alleging he was owed money for unpaid minimum wage and overtime.  Under the FLSA the employer has the burden of proving that an employee is ineligible for overtime or minimum wage compensation and in this case the court found in the company’s favor, saving it nearly $20,000 in wages and overtime.  Why?

 

Here, the employee drove the delivery truck as well as sold products.  He was also encouraged to visit new stores to bring in new business. And, he received commissions based on the sales. The critical factor here was that the employee was not just driving and delivering.  The company did have employees whose only job was to deliver pre-ordered goods.  Those employees were not exempt from the FLSA and accordingly, were paid at least minimum wage and overtime if applicable.

But Meza had more duties than just driving and delivering goods.  The court reviewed the FLSA regulations on outside sales and went through each factor to see how it applied to Meza.  To be considered outside sales, the primary duty has to be: 1) making sales or obtaining orders, and; 2) the employee has to be regularly away from the employer’s place of business when performing the primary duty.  Besides this basic guideline, there are also nine (9) factors to consider and the court went through each one to see how they compared to Meza’s duties.  Ultimately, the court decided that only one factor favored Meza, five favored the company and two were not applicable to this case so the company prevailed.

 

Bottom line:  if you use route salespeople as a part of your business and you want those employees to be exempt from overtime and minimum wage requirements, be sure they meet the criteria.  Call us if you have questions.

 

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