While many employees are eligible for a certain amount of overtime pay and a minimum wage under the FLSA, certain types of employees are exempt. With exempt employees, employers are not required to pay overtime according to the FLSA. One example of such exempt employees are those employees that meet the requirements of the “outside sales exemption.” Does the outside sales exemption mean that all salespeople are exempt under the FLSA? What about salespeople who travel to various locations to sell products? It is critical for all employers to understand the outside sales exemption in order to remain in compliance with the FLSA.
Understanding the Outside Sales Exemption
According to the U.S. Department of Labor (DOL), in order to qualify for the outside sales exemption, all of the following must be true:
- Employee’s primary duty is making sales, taking orders, or securing contracts for services for the use of facilities, which the client or customer will be paying for; and
- Employee must be customarily and regularly engaged away from the employer’s place or places of business.
The exception does not apply to people who conduct sales work from their employer’s office or regular place of business. Yet what does this exemption mean for salespeople who often travel to various locations to sell their employers’ products, such as to university campuses or festivals? Does it make a difference if the salespeople are conducting business in tents and vehicles stylized by the merchandise they are selling or the employer’s trademark? The DOL recently received a question about this type of sales work and whether it qualifies for the outside sales exemption. We want to provide more information about this type of work for Texas employers.
Traveling Salespeople and the Outside Sales Exemption
The DOL opinion discussed a particular kind of sales work in which an employer “deploys salespeople to high-population areas and events to sell products,” which are “typically locations with high foot traffic and dense populations” such as campuses, festivals, concerts, and other similar events. These employees use vehicles that are “stylized” and “stocked with merchandise, marketing displays, and demonstration units,” and they often bring potential customers to those vehicles to test units and to conduct sales. The employees are generally responsible for managing the event calendar to decide when and where to take the truck and how to stock it. They receive a base salary plus commissions.
The DOL discussed two requirements for the outside sales exemption cited above and determined that the first requirement certainly is met for the kind of employees described above. The second prong is more complicated. The DOL referred to language that has been used to define “customarily and regularly” to mean “greater than occasional but . . . less than constant.” It does not need to mean “a majority of the time.” Even salespeople who are “away from the employer’s place of business for approximately one or two hours a day, one or two times a week” can be exempt under the outside sales exemption. Accordingly, the kind of salespeople described above would pass the exemption test.
In case employers are wondering, even though the trucks and vehicles are branded by the employer’s mark or advertising, they cannot be considered a “place of business.” The DOL underscores that a place of business is defined as a “fixed site.”
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