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Are Your “Outside Sales” Employees Still “Outside”?

The federal Fair Labor Standards Act, which governs minimum wage and overtime requirements, has an exemption for employees engaged in “outside sales.”  To be exempt, the employee must, among other requirements, “be customarily and regularly engaged away from the employer’s place or places of business.”  Some employers are discovering that due to budget cutbacks and technological advancements, employees who once met this test no longer do.  This means the employees could be eligible for overtime, which can be a significant expense for employers.

In order to be an exempt outside sales employee, two requirements must be met:

  • The employee’s primary duty must be making sales, or obtaining orders or contracts for services or for the use of facilities for which payment is made and
  • The employee must be customarily and regularly engaged away from the employer’s place(s) of business.

The bottom line is that the employee must sell something and he or she must do so off-site, normally at the customer’s home or place of business.  Keep in mind, working out of one’s home is not “off-site.”  Sales made by mail, the telephone, or the Internet are not included, unless these methods are used merely as an adjunct to personal visits.  Moreover, outside sales must be the employee’s primary responsibility.

Employers using the outside sales exemption should take a careful look at what their employees actually do.  Do they spend most of their time making telephone calls and sending emails or are they out visiting clients?  Have they absorbed other job responsibilities so that outside sales no longer comprise the primary job function?  If so, is it possible another exemption applies so that overtime is not required, but outside sales is not the answer?

Since employers are likely to make job classification decisions for large groups of similarly situated employees, a single mistake can be extraordinarily expensive.  We recommend employers undertake an internal “Wage and Hour Audit” each year to review the company’s practices to ensure they are in compliance.  A labor and employment law attorney should assist in checking each job classification to ensure no mistakes are being made and your audit does not become a “smoking gun” upon which the government relies to make its case against you.

Brody and Associates regularly advises management on complying with state and federal employment laws including wage-and-hour laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.