The Fair Labor Standards Act (“FLSA”) overtime law requires employees to receive overtime pay for hours over forty (40) in week, unless the employee is “exempt” from overtime. Generally, an employee is entitled to receive overtime (even if paid a salary or commission basis), and if the employer does not pay overtime, then it is employer’s burden of proof to show that the employee fits squarely within a claimed exemption. When it comes to employees working sales, there are several exemptions that employers often use to avoid paying an employee overtime. In this article, I will discuss the overtime exemption for outside sales employees.
Am I exempt from overtime as an “Outside Sales Employee” under the federal overtime law (FLSA)?
To qualify for the outside sales overtime exemption, your employer has the burden of proof and must show all the following:
- Your primary duty must be making sales, 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.
If your employer cannot show that your primary duty is making sales away from the employer’s place of business, then you are not exempt from overtime; meaning your employer must pay you time-and-one-half for all hours worked over forty (40) in a week.
What is my Primary Duty?
“Primary Duty” means the principal, main, major, or most important duty that the employee performs. Here it is important to not think you are exempt just because you have a certain title or job duty (i.e. Outside Salesman). An employee’s primary job duty is determined by analyzing all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole. I often think about it this way – would you still have a job if you were not engaged in X? If the answer to this question is no, then it is probably a primary duty of your job. However, we also look to the amount of time that you spend performing each task.
Am I Making Sales?
“Sales” includes any sale, exchange, contract to sell, consignment for sales, shipment for sale, or other disposition. It includes the transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property.
Away from Employer’s Place of Business?
Last, if your employer succeeds in showing that your primary duty is making sales, then your employer must also show that you are making sales away from your employer’s place of business. In general, an employee making sales away from the employer’s place of business if the employee is selling door-to-door, at the customer’s place of business, or at the customer’s home. However, sales made from the employer’s place of business do not qualify as outside sales – this includes work done by mail, telephone, internet, etc. Also, if you are working from home making telephone calls or internet solicitation, you are not exempt as outside sales. The employer does not have to own or be the tenant of the property where such activities are being performed.
In sum, outside sales employees sell their employer’s products, services, or facilities to customers away from their employer’s place(s) of business, in general, either at the customer’s place of business or by selling door-to-door at the customer’s home. If your primary duty is not making sales away from your employer’s place of business, then you may be entitled to substantial unpaid overtime.
If you have been classified by your employer as exempt from overtime under the outside sales exemption, and you believe you are non-exempt and entitled to overtime, please call the Texas employment lawyers at Herrmann Law to discuss.