Question: Are inside sales employees entitled to overtime?
Overtime for Inside Sales Representatives
Whether “Inside Sales” employees are due overtime depends on the job duties performed. Unfortunately, this is a very common problem and can be confusing. Remember: it does not matter what your job title is. What matters are your real job duties.
One common mistake that employers make is to consider all commissioned salespeople to be exempt employees. Most companies employ inside salespeople, including those who make telesales or email sales from remote locations. These inside sales people are generally not exempt from overtime pay.
More and more inside sales representatives are being misclassified as “exempt” from the overtime requirements of federal law. For example, timeshare salespersons have been regularly misclassified as exempt. However, the Department of Labor has stated that these positions are generally non-exempt, meaning the salespersons are entitled to overtime pay, including back pay for overtime hours worked before the misclassification was identified and fixed. It is not at all uncommon for companies to reclassify a job from “exempt” to “nonexempt”, begin to pay proper overtime going forward but fail to compensate workers for all of the unpaid back overtime they are owed for the past 2-3 years (or more in states such as California and New York).
Corporate Salespersons are entitled to Overtime
Corporate salespersons may also have a claim for overtime pay as inside sales representatives. These types of employees make sales from within the company’s office or from home. Generally, salespeople who do not leave the office to make sales qualify as non-exempt inside sales representatives and should receive overtime pay under the Fair Labor Standards Act (FLSA) regulations.
Criteria for non-exempt sales employees
If the employee’s “primary duty” is outside sales (as opposed to inside sales), then their duties in outside sales must be substantive. The definition of “primary duty” in the new regulations emphasizes that it must be the employee’s “principal, main, major or most important duty.” Under both the old and new rules, employees will not be exempt from overtime unless their primary duty is outside sales. Therefore, salespersons who perform other duties apart from outside sales may still be eligible for overtime.
DOL administrator’s interpretation for salespersons
The Department of Labor (DOL) issued an Administrator’s Interpretation leaving little doubt that an employee cannot be exempt under the administrative exemption if the primary duty is inside sales.
- Reversing a prior opinion, the DOL concluded that mortgage loan officers do not qualify for the administrative exemption, because their sales work constitutes nonexempt production work.
- The DOL stated that “[t]he typical job duties of a mortgage loan officer comprise a financial services business’ marketplace offering, the selling of loan products. Their duties involve the day-to-day carrying out of the employer’s business and, thus fall squarely on the production side of the business.”
- Plaintiff’s attorneys have filed numerous lawsuits challenging the exempt status of mortgage loan originators (with success) alleging that mortgage loan originators are nonexempt as inside sales persons.
All employees who sell from inside
The DOL’s Administrator’s Interpretation is not limited to the mortgage loan officers. It applies to all employees who sell from inside their employer’s place of business or their home.
Question: Why won’t the outside sales exemption apply?
Answer: In simple terms, because inside salespeople do not sell outside.
The regulations provide: “[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 do not include sales made by mail, telephone or the internet unless such a call is an adjunct to personal calls.”
An “employer’s place of business” includes an employee’s home office. Id. “[A]n employee whose primary duty is selling financial products does not qualify for the administrative exemption.”
In order to classify sales persons as exempt, an employer must ensure that employees actually “sell” to customers outside the employer’s office and employee’s home office – and that their “primary duty” is outside sales. The definition of “primary duty” in the regulations emphasizes that it must be the employees “principal, main, major or most important duty,” and that employees will not be exempt from overtime unless their primary duty is outside sales.
Court finds in favor of sale representatives
The following is from the court’s ruling in a case against Proficio’s licensed Owings Mills, Maryland office:
“The only point otherwise argued by Defendants is that Plaintiffs concede they never performed any work at Proficio’s licensed Owings Mills, Maryland office and, therefore, Plaintiffs have conceded they were “customarily and regularly engaged away from their employer’s place of business,” within the meaning of the “outside sales” exemption of 29 C.F.R. § 541.500. (Defs.’ Opp. 10.) Defendants’ interpretation of the exemption is contrary to the explanatory language of 29 C.F.R. § 541.502, which states, “[A]ny 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.”
Given that language, it matters not whether Plaintiffs worked in Proficio’s “licensed” location or in another location. Defendants have not sustained their burden of proving by clear and convincing evidence the applicability of the “outside sales” exemption to Plaintiffs. In fact, no genuine dispute of material fact exists on the applicability of this exemption. It does not apply to the Plaintiffs.”
Although the law is fairly clear in this area, this case serves as a reminder that employees need not be working out of the employer’s headquarters or “home” office, in order to be considered working from an inside sales location within the meaning of the FLSA.
Are your rights under the FLSA being violated? Have you been robbed of overtime? Contact us immediately for help. The Lore Law Firm defends and protects the rights of inside salespersons and provides a free consultation.