What are the Overtime Exemptions for Sales Employees?

Woman staring intently at computer screen. While many employees are eligible for overtime pay when they work more than 40 hours in a week, some may not be. However, workers are only exempt from overtime pay requirements if their jobs fit the criteria for an overtime exemption.

Employers often make the mistake of treating some employees as overtime exempt when they are not. For example, they may assume all salespeople who are paid on commission are exempt from overtime. This is not always true, and this assumption may result in some salespeople being denied overtime pay when they should be receiving it.

Below, our Sacramento wage and hour attorneys discuss overtime exemptions for sales employees. If you think you were wrongly denied overtime pay, give us a call today to discuss potential legal options.

Inside Vs. Outside Salespeople

Generally, inside salespeople are not exempt from overtime pay laws. Department of Labor (DOL) regulations say the DOL does not have the legal authority to exempt inside sales employees from federal minimum wage or overtime laws. Inside salespeople should be paid time-and-a-half for hours they work over 40 in a week.

If an inside salesperson is non-exempt, but he or she was misclassified, his or her employer must pay for unpaid overtime for the last two or three years. Employers are required to keep detailed records of hours worked to ensure employees are properly compensated.

Inside salespeople are those who make sales from an office environment. That means they often make sales over the phone, email or other online channels. Usually, there is no in-person contact between the salesperson and the potential client.

Salespeople who work from home may also be non-exempt and eligible for overtime pay.

Some inside salespeople may be exempt if the employer can prove:

  • The employee is employed at a retail or service establishment
  • The salesperson’s regular rate of pay is one-and-a-half times the minimum wage or more
  • Over half of the employee’s earnings are from commissions on goods and services

On the other hand, outside salespeople are generally exempt from overtime pay requirements. There are two criteria for an outside sales employee exemption from overtime pay:

  • The employee’s primary duty is making sales or securing orders or contracts for services or the use of facilities when a consideration will be paid by the client
  • The employee is regularly working away from the employer’s place of business

The phrase primary duty means the principal, main, major or most important duty of an employee. The phrase “making sales” encompasses:

  • Selling things
  • Exchanges
  • Contracts to sell
  • Consignment for sales
  • Shipment for sale
  • Transfer of title to tangible property
  • Tangible and valuable evidence of intangible property

Outside salespeople sell at the customer’s premises, such as his or her place of business or home. This does not include sales made over the phone, by mail or over the internet.

Promoting something may be considered outside sales work, but it depends on the circumstances under which you are performing the work. If you are doing promotional work that is incidental and in conjunction with your outside sales or solicitations, it may be exempt from overtime pay requirements.

Drivers who deliver and sell products may be exempt from overtime if their primary duty is making sales. There are multiple factors to consider about whether a driver’s primary duty is selling things:

  • Comparing the driver’s duties with the duties of other employees who sell things or drive
  • Whether there are contractual arrangements about the number of products to be delivered
  • If the driver has a license to sell or solicit when the law requires it
  • How the employee’s job is described in collective bargaining agreements
  • And other factors

How Employers May Try to Get Around Overtime Requirements

Employers often misclassify inside salespeople as exempt from overtime. If they learn they are wrong, they may try to make their inside salespeople go on the road a few times per month to qualify as outside salespeople. However, this does not make an employee exempt from overtime pay requirements.

Call Us Today to Discuss Possible Legal Options

For decades, our experienced attorneys have been securing compensation for workers who were denied overtime pay, those injured by asbestos, and those injured by the negligence of others.

If you have questions about filing a claim, give us a call today to discuss possible legal options. The initial consultation is free of charge and there is no obligation to take legal action after meeting with us.

We are ready to help. Call 916-777-7777 today.