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FLSA: Outside Sales Exemption

Introduction

The Fair Labor Standards Act (FLSA) is a federal law that establishes minimum wage, overtime, and other employment standards, affecting both the private and public sectors of employment. There are many “exemptions” within the FLSA that spare employers from compensating their employees both the minimum wage and overtime requirements, thus designating such employees as “exempt.” One such exemption is the “outside sales” exemption.

Outside Sales Exemption

To meet this exemption, employees must satisfy the following test: (1) the employee’s primary duties must be making sales, or obtaining orders or contracts for services or for the use of facilities for which the client or customer will pay some consideration; and (2) the employee must be “customarily and regularly” engaged away from the employer’s place or places of business. Under this same exemption, the FLSA imposes a minimum salary requirement for certain classifications of employees, however that minimum salary requirement does not apply to the outside sales employees. Nonetheless, if you do not meet the outside sales exception, you may still qualify as an exempt employee under the executive, administrative, or professional employee exemption, which is discussed in a previous blog post.

Primary Duty Test

To satisfy the first prong of the outside sales exemption test, the “principal, main, major, or most important duty” of an employee’s job must making sales or obtaining orders or contracts for services or for the use of facilities. In determining an employee’s “primary duties,” the character of the employee’s job as a whole is the major emphasis, in addition to the particular factors of the case. The FLSA defines “sales” as “any sale, exchange, contract to sell, consignment for sales, shipment for sale, or other disposition.” For example, “sales” includes the transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property.

“Customarily and Regularly” Test

To satisfy the second prong of the outside sales exemption test, the employee’s primary duties are normally done every workweek, not isolated one-time tasks. The outside sales employee makes sales outside of the office, either at the customer’s place of business, door-to-door, or at the customer’s home. Outside sales does not include sales by mail, telephone, or internet, unless such contracts are used in conjunction with personal sales. The FLSA considers two types of work that may qualify as outside sales, depending on the circumstances. First, promotional work can be exempt outside sales work. Exempt promotional work includes when the promotion work is performed incidental to and in conjunction with the employee’s own outside sales or solicitations. Second, drivers who sell and deliver products may qualify as exempt outside sales only if the driver’s primary duty is making sales. As with most FLSA exemptions, the individual facts and factors of each case matter in determining whether an employee qualifies for the outside sales exemption.

If you feel your rights under the Fair Labor Standards Act have been violated, or if you have any other questions regarding your employment rights, please contact the experienced Birmingham employment law attorneys at Wrady Michel & King. You can contact us either online or by calling us at (205) 3199724. We are here to serve you!