New Overtime Suit Involving Outside Sales Exemption
UPS is the latest large employer to be named in a potentially massive class action overtime lawsuit. The Company’s account managers claim that they were misclassified as exempt outside salespersons or administrative employees, even though they purportedly do not have the authority to enter into sales contracts, nor do they have managerial responsibilities. The employee who filed the suit claims to have regularly worked sixty-hour workweeks and received only a straight salary. The suit could eventually include hundreds, if not thousands of account managers who, according to the lawsuit, were mainly responsible for going to local businesses and delivering a pre-scripted promotional message for UPS.
Regardless of the UPS suit’s ultimate disposition, it illustrates the importance of correctly applying the outside sales exemption, particularly as the exemption pertains to employees who engage in promotional work. Not all “salespersons” are exempt under the Fair Labor Standards Act. Rather, only “outside salespersons” are exempt. To qualify for the outside sales exemption, the employee’s primary duty must be making sales (as defined by the statute) and the employee must “customarily and regularly” be engaged away from the employer’s place of business.
Ordinarily, an outside sales employee will be making sales at a customer’s place of business or at the customer’s home. Online or telephone sales do not constitute outside sales unless they are incidental to in-person sales calls made by the salesperson to the customer. There is no requirement that an outside salesperson constantly be away from the office. For example, if the salesperson returns to the office to prepare sales-related paperwork, that activity by itself usually does not compromise the outside salesperson’s exempt status.
According to the UPS suit, the Company’s account managers were mainly performing promotional work as opposed to sales. Promotional work can constitute exempt sales work if the promotional activity is incidental to, or done in conjunction with, the employee’s outside sales work. However, promotional work done in advance of sales made by someone else is not considered exempt outside sales work. As with many suits that center around the outside sales exemption, the UPS suit’s success will likely depend on whether account managers made sales or just laid the groundwork for other people’s sales.
