The Fair Labor Standards Act (FLSA) establishes the federal minimum wage, requirements for overtime pay, and limitations on child labor. You have more than likely seen the required poster explaining employees’ rights under the FLSA displayed in your workplace.
The FLSA applies to a broad range of public- and private-sector workers, but the law carves out a few noteworthy exceptions. One such exemption is for outside sales personnel. Merely having the title of “Outside Sales Representative” does not necessarily mean that you are covered under this exemption; rather, two substantive criteria must be met in order to qualify:
1. The employee’s principal responsibility is making sales; and
2. The employee routinely works away from the employer’s workplace.
In other words, while an outside salesperson may have minor duties outside of their core role and may spend some of their workweek in the office, an outside salesperson qualifies for the exemption if and only if (1) their main focus and most important function is sales and (2) their deals are made at the customer’s place of business rather than their employer’s.
It is important to note that any fixed location used by a salesperson to make sales, including a home office, is considered the employer’s place of business. Salespeople who make deals primarily over the phone, mail, or Internet thus do not, in most cases, qualify for the exemption. The exemption is aimed specifically at individuals who sell door-to-door or travel to their customers’ workplaces.
The Department of Labor, tasked with enforcing the FLSA, has published a fact sheet to clarify the scope of the exemption. They provide precise definitions of terms such as “sales” and “employer’s place of business.” Nevertheless, whether a particular employee qualifies for the exemption is rarely black and white and will always depend on the facts specific to their situation. It may depend on how the employee’s duties compare to those of their co-workers in similar roles, for example, or whether the employee holds certain licenses required to perform their duties.
A recent court case in Massachusetts provides an informative example of an ambiguous case.[1] Brand representatives whose jobs required them to travel to retail stores, set up displays, and present demonstrations of their company’s products argued that they did not meet the definition of outside sales and were thus owed overtime pay. The court found that although the brand representatives did not exchange their products directly for payment, their efforts to “persuade shoppers, who then can demonstrate some intention… to buy a product by placing it in their shopping carts or baskets,” meet the FLSA’s definition of “sales.” The employees were deemed to qualify for the outside sales exemption and were not awarded the overtime pay they sought.
If there is any doubt over whether you or your employee qualify for the outside sales exemption to the FLSA, it is best to consult an attorney, since employers who violate the FLSA are subject to hefty fines for each violation.
[1] Modeski v. Summit Retail Solutions, Inc., 1st Cir., No. 20-1747 (Feb. 25, 2022).