Best Ohio Minimum Wage Lawyer Reply: Should I still get paid if my pay is based on sales and I haven’t closed any deals? Is there an exception to minimum wage for sales people? What can I do if my employer isn’t paying me? How do I sue my job for wage theft?
As our wage and hour attorneys have previously blogged about, the Fair Labor Standards Act (“FLSA“) requires that employers must pay all covered, non-exempt employees a minimum wage of $8.10 in Ohio. Under these same wage laws, the employer must pay these employees time and a half for every overtime hour that such employee works over 40 hours. Employers must also keep accurate records of its employees’ wages and hours worked. (See Can I Sue My Boss Individually For Not Paying Me For Overtime? I Need A Wage Lawyer!; Top Wage and Hour Lawyer Reply: As A Salaried Employee, Am I Exempt From Overtime Pay?; The FLSA Can Make A Damages Mountain Out Of Molehill Lost Wages; What’s The Minimum Salary To Be Exempt For Overtime?; and Top Wage Lawyer: Is Everyone Entitled To Earn Minimum Wage In Ohio?).
There are several exceptions to the minimum wage requirements under the FLSA including, but not limited to:
any employee employed in a bona fide executive, administrative, or professional capacity (including any employee employed in the capacity of academic administrative personnel or teacher in elementary or secondary schools), or in the capacity of outside salesman (as such terms are defined and delimited from time to time by regulations of the Secretary, subject to the provisions of subchapter II of chapter 5 of title 5, except that an employee of a retail or service establishment shall not be excluded from the definition of employee employed in a bona fide executive or administrative capacity because of the number of hours in his workweek which he devotes to activities not directly or closely related to the performance of executive or administrative activities, if less than 40 per centum of his hours worked in the workweek are devoted to such activities)
If you read that first exception very carefully, you may have notice that one exception was “outside salesman.” At first glance, this seems like a term that needs no further explanation, but in Freeman v. Kaplan Inc., the United States District Court For The Northern District of Illinois recently explained that “outside salesman is defined not by the FLSA itself but in a web of interlocking Department of Labor regulations.” And, none of the terms in the definition of “outside salesman” have the same meaning under the regulations as they do in the dictionary. Under Reg. § 541.500(a): an “outside salesman” means any employee:
(1) Whose primary duty is:
(i) making sales within the meaning of section [203(k) ] of the Act, or
(ii) 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
(2) Who is customarily and regularly engaged away from the employer’ s place or places of business in performing such primary duty.
The employee in this case, Freeman, was a law student that worked initially as a student representative for Kaplan. Anyone who has studied for the Bar Exam is familiar with Kaplan. Kaplan is an expensive bar exam preparation course, and there are student representatives on campus who sign up other students for the course in exchanged for a free or reduced priced course for themselves. After a short time as a student representative, Freeman was given the position as “head rep.” As head rep, Freeman was to set up and take down the Kaplan sales table on campus, promote sales of Kaplan’s courses, post Kaplan fliers on bulletin boards, write Kaplan messages on the classroom chalk boards, and make Kaplan announcements in class. Freeman also had to answer emails and run promotional events for Kaplan, in addition to organizational and clerical tasks.
Going back to the definition of “outside sales”, the first term in the definition is “primary duty.” Thus, the court first looked at whether Freeman’s primary duty was making sales. Under Reg. § 541.700(a), primary duty is defined as “the principal, main, major or most important duty that the employee performs.” That seems straightforward enough, but there is an exception. Promotion work under Reg. § 541.503:
Promotion work is one type of activity often performed by persons who make sales, which may or may not be exempt outside sales work, depending upon the circumstances under which it is performed. Promotional work that is actually performed incidental to and in conjunction with an employee’s own outside sales or solicitations is exempt work. On the other hand, promotional work that is incidental to sales made, or to be made, by someone else is not exempt outside sales work
In other words, in the case of promotion work, an employee has a primary duty of sales only if that employee is doing work to drum up business for her own account. If the employee is drumming up business for other salespeople, then her primary duty is not sales.
The court analyzed Freeman’s positions as a student representative and head rep separately. The court looked at the student rep position: Freeman could earn more money from closing sales, and Freeman’s testimony that she stopped making sales after she became head rep, thus the court reasoned that her primary duty as student rep was making sales. However, when the court looked at the head rep position: Freeman was spending most of her time performing non-exempt promotional activities, and sales were such a small portion of her total compensation, the court reasoned that a jury could reasonably conclude Freeman did not have a primary duty of making sales.
The analysis did not stop there. Even though as student rep, Freeman’s primary duty was sales, the court had to then go on and determine whether Freeman was “customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty.” Kaplan tried to take the easy way out, and claimed that since she didn’t work at a Kaplan office, she never worked at one of Kaplan’s places of business. However, Reg. § 541.502 defines “away from the employer’s place or places of business”:
An outside sales employee must be customarily and regularly engaged “away from the employer’s place or places of business.” The outside sales employee is an employee who makes sales at the customer’ s place of business or, if selling door-to-door, at the customer’ s home. Outside sales does not include sales made by mail, telephone or the Internet unless such contact is used merely as an adjunct to personal calls. Thus, any fixed site, whether home or office, used by a salesperson as a headquarters or for telephonic solicitation of sales is considered one of the employer’s places of business, even though the employer is not in any formal sense the owner or tenant of the property. However, an outside sales employee does not lose the exemption by displaying samples in hotel sample rooms during trips from city to city; these sample rooms should not be considered as the employer’s places of business. Similarly, an outside sales employee does not lose the exemption by displaying the employer’s products at a trade show. If selling actually occurs, rather than just sales promotion, trade shows of short duration (i.e ., one or two weeks) should not be considered as the employer’s place of business.
Even though that is not a bright-line definition, somehow the court found that by focusing on the relationship between the employer’s activities and the employee’s activities, it could determine if the sales were outside the employer’s place of business. Because Kaplan rented space from Loyola to put up a table and sell courses for longer than a “trade show of short duration,” and maintained several employees on campus, the court found that Loyola was Kaplan’s place of business.
Remember, the court had to determine whether Freeman was “customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty.” This analysis only gets us half way there. We still haven’t gotten to whether Freeman “customarily and regularly” made sales away from Loyola. As you may have guessed by now, there is a definition for “customarily and regularly” under the regulations. Reg § 541.701 defines “customarily and regularly” as:
The phrase “customarily and regularly” means a frequency that must be greater than occasional but which, of course, may be less than constant. Tasks or work performed “customarily and regularly” includes work normally and recurrently performed every workweek; it does not include isolated or one-time tasks.
Once again, Kaplan tried to take the easy way out and said that Freeman stated that she spent 20 percent of her time working off-campus, therefore she “performed her primary duty of sales away from Loyola ‘customarily and regularly’ as a matter of law.” The court disagreed, since Kaplan didn’t show the frequency or regularity of Freeman’s work, there was no way to conclude whether the off-campus work was “customarily and regularly” or “occasional”, “isolated,” or “one time tasks” instead.
In the end, the court had to go through all that analysis just to determine whether Freeman could be considered an outside salesman, and would be exempt from minimum wage. This case is a great example of how it is not always clear whether someone is exempt from the minimum wage requirements of the FLSA.
If you believe that your employer is not paying you all of your wages for all of your lawfully earned overtime compensation at a rate of one and half times your normal wages as requires under the Federal Fair Labor Standards Act or Ohio Minimum Fair Wage Standards laws or you are an nonexempt employee that has been misclassified as exempt or independent contractor, contact the attorneys at The Spitz Law Firm today for a free and confidential initial consultation. The wage and hour lawyers at The Spitz Law Firm will provide you with the best options for your overtime pay dispute situation. If you even think that you may be entitled to overtime pay that you are not being paid, call 866-797-6040.
The materials available at the top of this overtime, wage and hour web page and at this employment law website are for informational purposes only and not for the purpose of providing legal advice. If you are still asking, “Am I entitled to overtime?”, “Does my job have to pay me for …”, “My paycheck is not right…” or “What do I do if…”, the your best option is to contact an Ohio overtime attorney to obtain advice with respect to FLSA questions or any particular employment law issue. Use and access to this employment law website or any of the links contained within the site do not create an attorney-client relationship. The legal opinions expressed at the top of this page or through this site are the opinions of the individual lawyer and may not reflect the opinions of The Spitz Law Firm, Brian Spitz, or any individual attorney.