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Are Outside Salespeople Exempt Form Overtime Pay Under The FLSA?

by | Apr 15, 2022 | Employment Law, Wage: Minimum Wage, Wage: Overtime |

One of my daughter’s favorite things about going to Costco is the free samples. (I have to admit that I enjoy it too). Most people don’t realize that people giving samples don’t work for Costco – unless you try to ask them where some product that is unrelated to the samples is. They typically work for an outside company that represents the products that are being sampled. This is an important distinction for an evaluation of whether these workers are entitled to an overtime pay premium when they work more than 40 hours in a designated workweek.

What does “exempt employee” mean under the FLSA?

Best Wage and Hour Lawyer Answer: The Fair Labor Standards Act (“FLSA”) is the federal law that makes sure that workers are paid minimum wage and overtime pay at time and a half for all hours over 40 in a designated workweek. The FLSA starts with the presumption that all employees are entitled to overtime pay but allows employers the opportunity to show that particular workers fall within a list of specified exemptions. As such, when an employer can meet its burden to show that an employee falls within an FLSA exemption, that worker is then referred to as an “exempt employee.” Exempt employees are not entitled to the overtime pay premium while non-exempt employees are. (Best Law Read: Are All Professionals Exempt From Overtime Pay? I Need A Lawyer!; Top Wage and Hour Lawyer Reply: As A Commissioned Salesperson, Am I Exempted From Being Paid Overtime Wages?; Making Sense of the FLSA’s Administrative Exemption).

Are all salaried employees considered exempt under the FLSA?

Best Wage Theft Attorney Answer: Just because an employee is paid a salary does not mean that employee is exempt and not entitled to overtime pay. It is very important to dispel the common misconception that just because all salaried employees are exempt because it is one of the single biggest basis for wage theft. While on the flip side, all hourly employees are entitled to the overtime pay premium. (Best Law Read: Can Hourly Employees Be Exempt From Overtime?; What Is The Minimum Salary To Be Exempt From Overtime Pay Requirements?; Top Wage and Hour Lawyer Reply: As A Salaried Employee, Am I Exempt From Overtime Pay?)

How do you determine if outside salespeople exempt from overtime and minimum wage requirements under the FLSA?

Best Wage Rights Lawyer Answer: One of the exceptions to both overtime and minimum wage requirements under the FLSA is for anyone employed “in the capacity of outside salesman.” 29 U.S.C. § 213(a)(1). While the FLSA does not provide much guidance on what constitutes “outside sales,” Department of Labor (“DOL”) has filled in the gaps. Pursuant to the DOL, for an employee to fall within the outside sales exemption, the employer has the burden to show all of the following:

  1. The employee must be paid on a salary basis at a rate not less than $684 per week ($35,568 per year);
  2. The employee’s primary duty must be making sales or procuring contracts or orders for services, goods or use of facilities in exchange for payment by the customer; and
  3. The employee must be customarily and regularly engaged away from the employer’s place or places of business.

The DOL has defined “primary duty” to mean, “the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.”

Importantly, the DOL has also addressed when the sales are considered “outside” and provided: “An outside sales employee makes sales at the customer’s place of business, or, if selling door-to door, at the customer’s home. … 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.”

Criterial to our topic today, the DOL addressed outside promotional workers as follows; “Promotion work 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. However, promotion work that is incidental to sales made, or to be made, by someone else is not exempt outside sales work.”

Obviously, this is very complex, complicated, and likely confusing. There is very rarely a clear answer, which is why it is important to get help from the best wage and hour lawyers you can.

Are brand ambassadors considered outside salespeople?

Best FLSA Lawyer Answer: One court has recently held that brand ambassadors are outside salespeople for the purpose of being exempt under the FLSA. In Modeski v. Summit Retail Sols., Inc., No. 20-1747, 2022 WL 574733 (1st Cir. Feb. 25, 2022), the United States Court of Appeals for the First Circuit, which has jurisdiction over the federal courts in Maine, Massachusetts, New Hampshire, Puerto Rico, and Rhode Island, a group of employees working as “brand representatives” brought collective action for failure to pay overtime wages under the FLSA against their employer, Summit Retail Solutions, which is a marketing company that contracts with department stores, grocery stores, and wholesale retailers to provide in-store demonstrations designed to increase sales. (Summit’s clients include Costco, Sam’s Club, and BJ’s).

The United States Court of Appeals for the First Circuit first evaluated the facts associated with doing this job. Summit gives the Brand Representatives with sales pitch scripts, promotional materials, and training in specific sales techniques. Summit tells the Brand Representatives that their target is to get the consumer to put the product a shopping cart or basket. It was undisputed that Brand Representatives do not and cannot complete any sale at their display station. As such, Brand Representatives never know whether consumers ultimately buy the goods being promoted. It was also undisputed that Brand Representatives are not personally responsible for every sale of a displayed item. “For example, a customer might grab a box of pierogi from the freezer without engaging with the Brand Rep or take a pillow from the display station when the Brand Rep is away on lunch break.”

Further relevant to the analysis, Summit assigned Brand Representatives to specific stores, set required schedules, and controlled the products to be promoted. Starting each workday, Summit required Brand Representatives to provide time-stamped pictures of their displays in order to confirm that the employees arrived timely and properly set up the displays. Summit carefully recorded and tracked the Brand Representatives’ hours worked.

As part of the lawsuit, the employees conceded the first and third elements listed above, namely that they were “customarily and regularly engaged away from the employer’s place or places of business;” and that their “primary duty” was communicating with store customers in the effort to convince them to buy the featured products. However, the employees argued that they were non-exempt and did not fall into the outside sales exemption because they were not “making sales,” because they “never sold anything” – “i.e., they did not obtain a sufficiently concrete purchase commitment from shoppers (who were always free to reconsider their decision to take a product from the display station and remove the item from their cart before heading to the register).” Id. at *3.

The United States Court of Appeals for the First Circuit rejected the employees argument and affirmed the dismissal of the lawsuit. It held:

we should consider the plaintiffs’ situation pragmatically, in the context of the relevant industry, not relying on technicalities, and without requiring them to have obtained a firm commitment to buy in order to determine that they “mak[e] sales” within the meaning of the FLSA. Taken together, these considerations support our conclusion that Brand Reps fall within the outside sales exemption.

Although they do not ring up any purchase at the register, Brand Reps do as much as practically possible to “in some sense make[ ] a sale” in the retail store context in which they operate. Brand Reps work to persuade shoppers, who then can demonstrate some intention (or “nonbinding commitment”) to buy a product by placing it in their shopping carts or baskets. As the district court noted, “[t]he cashiers r[i]ng up the sale, but otherwise engage[ ] in no sales activity of any kind. There is no evidence that any cashier ever attempted to persuade a customer to buy the product, and indeed it would [be] odd for them to do so at the point of check-out.” That is, a Brand Rep is the last person to make an actual sales effort; the finalization process — at the checkout register when the cashier rings up the purchase — is simply a nondiscretionary, ministerial act that does not involve any additional sales effort. See Gregory v. First Title of Am., Inc., 555 F.3d 1300, 1310 (11th Cir. 2009) (finding plaintiff subject to the outside sales exemption in part because there was “no intervening sales effort between her efforts and the consummation of the sale”). In short, the type of transaction at issue, in this case, fits well within the broad “other disposition” catchall for “making sales.” … In this case, Brand Reps did obtain a commitment from customers (albeit a nonbinding one) and generally were credited with sales made as a result of their efforts. [Internal citations and footnotes omitted]

Id. at *4.

What should I do if my employer is not paying me overtime pay?

Best Ohio Wage Theft Attorney Answer: Get help. The FLSA is tricky and complicated. Most lawyers have never dealt with the FLSA, much less the complexities of the exemptions. 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 required under the Federal Fair Labor Standards Act or Ohio Minimum Fair Wage Standards laws or you are a non-exempt employee that has been misclassified as exempt or independent contractor, contact the attorneys at Spitz, The Employee’s Law Firm today for a free and confidential initial consultation. The experienced wage and hour lawyers at Spitz will provide you with the top 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 our Cleveland, Columbus, Cincinnati, Toledo, Boardman, and Detroit attorneys right now. Do not wait. The longer that you wait, the less that your claim may be worth.

Disclaimer:

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 overtime if I work outside sales”, “My paycheck is missing time and half for overtime pay” or “What do I do if the company that I work for refused to pay the overtime premium”, 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.