Thursday, June 16, 2011

Are You Really Doing Outside Sales So That You Are Exempt From Overtime?

IS IT POSSIBLE I AM ENTITLED TO OVERTIME EVEN THOUGH MY EMPLOYER SAYS I AM DOING OUTSIDE SALES?

Many, many employers misclassify their employees as being exempt from overtime, when in fact the employees are non-exempt (i.e. entitled to overtime).  One could surmise this is not always accidental, since overtime is expensive!

The job title given to the employee does not matter; paper job descriptions do not matter.  What matters is what the employee actually does on a regular basis. 

One of the most common misclassification errors has to do with the Outside Sales classification.  Sometimes, this comes up in connection with commissioned salespeople, who may also be unlawfully deprived of being paid the minimum wage for each hour worked.

To be truly engaged in Outside Sales, one must regularly engage in performing Outside Sales; the employee's primary duty must be engaging in outside sales.  Often, if an employee spends less than 50% of the time engaging in outside sales, he/she will be deemed non-exempt, and thus entitled to overtime (in Pennsylvania, as discussed below, an employee may not be deemed an exempt outside salesperson unless they spend 80% or more of their time performing outside sales)..

WHAT ARE "OUTSIDE" SALES UNDER THE FAIR LABOR STANDARD ACT?


The short and sweet of it is as follows:  Outside Sales mean sales efforts that are undertaken at the place of business of the potential customer.  Thus, people that make cold calls from a telephone all day are not engaged in Outside Sales, even though they are attempting to make sales by calling customers who are located elsewhere from the employee.

The Code of Federal Regulations, which have been enacted to provide guidance on FLSA exemptions, and which are relied upon by most courts, state: “[t]he 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…

WHAT ARE OUTSIDE SALES UNDER PENNSYLVANIA'S MINIMUM WAGE ACT?

People employed in Pennsylvania have additional protections where overtime is concerned pursuant to the Pennsylvania Minimum Wage Act ("PMWA").  Perhaps most importantly, under PMWA, you may not be deemed an outside salesperson unless you are spending 8o% or more of your time performing outside sales.

WHAT DOES IT MEAN TO BE "MAKING SALES?"

Typically, when construing what it means to be performing outside sales, the standards established by the federal regulations pursuant to the Fair Labor Standards Act govern claims under both state and federal laws.  Here is what the federal laws says about what it means to be "making sales."

Whether an employee is engaged in "making sales" within the meaning of this exemption is a fact-intensive inquiry dependent on each employee's job responsibilities and duties.  In this connection, the CFR states the following:   

Another example [discussing the outside sales exemption set forth in the regulations] is a company representative who visits chain stores, arranges the merchandise on shelves, replenishes stock by replacing old with new merchandise, sets up displays and consults with the store manager when inventory runs low, but does not obtain a commitment for additional purchases. The arrangement of merchandise on the shelves or the replenishing of stock is not exempt work unless it is incidental to and in conjunction with the employee's own outside sales. Because the employee in this instance does not consummate the sale or direct efforts toward the consummation of a sale, the work is not exempt outside sales work.

With regard to the “primary duty” component of the test, the regulations state:

(a) To qualify for exemption under this part, an employee's "primary duty" must be the performance of exempt work. The term "primary duty" means 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. Factors to consider when determining the primary duty of an employee include, but are not limited to, the relative importance of the exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee's relative freedom from direct supervision; and the relationship between the employee's salary and the wages paid to other employees for the kind of nonexempt work performed by the employee.

(b) The amount of time spent performing exempt work can be a useful guide in determining whether exempt work is the primary duty of an employee. Thus, employees who spend more than 50 percent of their time performing exempt work will generally satisfy the primary duty requirement. Time alone, however, is not the sole test, and nothing in this section requires that exempt employees spend more than 50 percent of their time performing exempt work. Employees who do not spend more than 50 percent of their time performing exempt duties may nonetheless meet the primary duty requirement if the other factors support such a conclusion.

(c) Thus, for example, assistant managers in a retail establishment who perform exempt executive work such as supervising and directing the work of other employees, ordering merchandise, managing the budget and authorizing payment of bills may have management as their primary duty even if the assistant managers spend more than 50 percent of the time performing nonexempt work such as running the cash register. However, if such assistant managers are closely supervised and earn little more than the nonexempt employees, the assistant managers generally would not satisfy the primary duty requirement.

CAN I FILE A LAWSUIT TO COLLECT UNPAID OVERTIME?

Yes.  Since FLSA is a federal statute, you can sue in your local federal court.  And, if you win, you get $2 for every $1 the employer failed to pay to you.  There is essentially a presumption that most federal courts courts draw in favor of employees being entitled to overtime.  Hence, courts construe overtime laws narrowly against employers.

Many states have state laws governing overtime laws as well.  While many of them are interpreted the same as the FLSA, it is still a good idea to familiarize yourself with the laws of your state before filing suit.  For example, anyone filing a claim for overtime involving the outside sales exemption would certainly want to include a claim under the PMWA, with its 80% "bright line rule."

WHAT IS THE STATUTE OF LIMITATIONS FOR OVERTIME CLAIMS?

The statute of limitations for an FLSA overtime claim is 3 years if the failure to pay is deemed intentional (which it often is) and 2 years if it is deemed inadvertent. 

Some states may have different statutes of limitations.

More questions about overtime and the FLSA?  Click Here.