Minimum Wage and Overtime Exceptions: Understanding the Outside Sales Exemption

Employers in Texas and throughout the U.S. are required to pay employees a minimum wage unless they are exempt. Under the Fair Labor Standards Act (FLSA), there are a wide variety of workers who may be exempt, which means the employer is not required to pay the minimum wage and/or overtime compensation. However, it is important for employers to understand, as the U.S. Department of Labor (DOL) explains, that “exemptions are narrowly construed against the employer asserting them,” and the “ultimate burden of supporting the actual application of an exemption rests on the employer.” Common exemptions include commission sales employees, computer professionals, certain drivers and mechanics, farmworkers on small farms, and employees of seasonal and recreational establishments, and others. In addition, there is an FLSA exemption related to overtime compensation for executive, administrative, professional, and outside sales employees “who are paid on a salary basis.”

This article will focus on the outside sales exemption and provide you with more information about your responsibilities as an employer in Texas.

What is the Outside Sales Exemption?

In order for your business to classify an employee as being exempt from the minimum wage and overtime compensation requirements due to an outside sales exemption, you must be able to meet the following tests as outlined by the DOL:

  • Employee’s primary duty is making sales as the FLSA defines it, or the employee’s primary duty is “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
  • Employee needs to be “customarily and regularly engaged away from the employer’s place or places of business.”

Defining “Making Sales” 

The FLSA defines “making sales” as “any sale, exchange, contract to sell, consignment for sales, shipment for sale, or other disposition,” and it can include tangible property transfers or even intangible property in some circumstances.

Defining “Obtaining Orders for Services or for the Use of Facilities” 

What does this language mean? The FLSA explains that obtaining orders “for the use of facilities” can include “the selling of time on radio or television, the solicitation of advertising for newspapers and other periodicals, and the solicitation of freight for railroads and transportation agencies.”

Understanding How “Primary Duty” is Defined

Finally, how can you know if the employee’s primary duty is making sales or obtaining orders or contracts as required by the FLSA, especially when the employee’s job involves other tasks? The FLSA defines a primary duty as “the principal, main, major, or most important duty that the employee performs.” If you have questions about whether an employee is exempt under the outside sales exemption, one of our Texas employment lawyers can assess the facts and can provide more information about your responsibilities as an employer.

Away from the Employer’s Place of Business

It’s also important that employers understand what it means to be engaged away from the employer’s place of business.  Keep in mind that a sales employee who works from home regularly and engages in sales from his or her home is unlikely to be considered to be engaged away from the employer’s place of business.

Contact Our Texas Employment Law Attorneys

You will make business and payroll decisions based on your assessment of the FLSA exemption, so it’s vital to do this correctly. If you have employees you believe are covered by the outside sales exemption, seek advice and guidance from an experienced Frisco employment lawyer.  Contact Simon Paschal PLLC today for assistance.

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