From the Archive: Is the Internet destroying the Outside Sales exemption?

by Michael Haberman on March 16, 2017 · 0 comments

Make sure your sales people are conforming to the USDOL definition of Outside Sales.

I get sales calls all the time, often proceeded by an email, or followed up by an email. I thought it would be relevant to raise this issue again for companies to pay attention to. 

With the tool of the Internet a lot of sales are conducted online. I know that I am solicited a lot by emails and phone calls. In the “old days” of sales a representative would come to you place of business,” knock” on your door and then make a pitch. These people were genuine outside sales reps. Today the knock on the door is an email. I express an interest in a product and I am connected to a demonstration online. Based on that demo I may then decide on a trial or even a purchase. At no point in that process did the sales representative ever visit my facility. Without that visit does this person qualify for the outside sales exemption?

What does it take to be qualified as an outside sales rep?

First, “exemption” means that the sales rep is exempt from being paid overtime and additionally exempt from having to be paid a minimum salary. According to USDOL Fact Sheet #17F to be considered an outside sales representative the employee must meet the following standard:

  • The employee’s primary duty must be making sales (as defined in the FLSA), or 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
  • The employee must be customarily and regularly engaged away from the employer’s place or places of business.
  • “Sales” includes any sale, exchange, contract to sell, consignment for sales, shipment for sale, or other disposition. It includes the transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property.

There is one clear statement that deals with my point. The Fact Sheet specifically says “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.” (My emphasis)

Regardless of location

This provision holds even if the sales representative is not working in the company location. Many sales reps operate out of satellite offices or even out of their homes. If they are not out making calls “customarily and regularly” then they are not going to qualify as outside sales representatives they are just going to be teleworkers. The Fact Sheet clearly says “Any 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.”

Therefore if the nature of your sales jobs has changed due to the Internet you may now be responsible for paying overtime to your sales reps and also guaranteeing a minimum wage because the job needs to be reclassified as nonexempt.

If you have jobs that you suspect may have changed it might be prudent for you to contact an employment attorney and verify the actual classification of that job as either exempt or nonexempt.

Photo credit: stockimages

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