The Fair Labor Standards Act (FLSA) exempts from its minimum wage and overtime standards employees who qualify as outside sales employees. 29 USC 213(a)(1); 29 CFR 541.500-504(a).
Outside Sales Exemption Test
For an employee to qualify for the outside sales employee exemption, the following criteria must be met:
- have the primary duty of:
- making sales, or
- obtaining orders or contracts for services or the use of facilities;
- customarily and regularly perform his or her primary duty away from the employer’s place of business.
Incidental Work
Worked that is incidental to, performed in conjunction with, or furthers an outside sales employee’s sales efforts is considered exempt work. This could include, but is not limited to writing sales reports, updating or revising the sales or display catalogue, planning itineraries, and attending sales conferences. 29 CFR 541.500(b).
No Salary or Fee Basis Requirement
There is no requirement that an exempt outside sale employee be paid a minimum salary or be paid on a salary or fee basis. 29 CFR 541.500(c).
Making Sales
Making sales includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition. It can include tangible property and, in certain cases, intangible property. 29 CFR 541.501(b).
Obtaining Orders
Outside sales employees do not need to perform the service for which they have obtained orders. Orders for the use of facilities includes, but is not limited to, time on radio or television, advertising for newspapers, magazines, and other periodicals, and freight for railroads and other modes of transportation. 29 CFR 541.501(c)-(d).
Away from Employer’s Place of Business
To qualify for the exemption, an outside sales employee must customarily and regularly work away from his or her employer’s place of business. Outside sales employees who are exempt makes sales in person at the customer’s place of business or at the customer’s home, if selling door-to-door; they do not make sales by mail, telephone, or the internet unless it is related to in-person calls. For purposes of this exemption, any location, whether home or office, regularly used by a salesperson as a headquarters or for telephone or internet sales is considered one of the employer’s places of business, even if the employer is not the owner or tenant of the property. An outside sales employee does not lose his or her exemption by operating temporarily out of a location to display samples during sales trips. This includes displays at product trade shows of short duration. 29 CFR 541.502.
Promotion Work
Promotional work may be deemed exempt work if it is incidental to and performed in conjunction with an outside sales employee’s own sales work. It is not exempt if it is not directly related to the sale process or if it is performed by someone else. Thus, an outside sales employee who puts up displays, removes damaged stock, or rearranges merchandise is performing exempt work if such promotional activities are intended to result in the outside sale employee making sales to the customer. An employee that simply puts up displays, removes damaged stock, or rearranges merchandise, but has no responsibility for selling to the client, is not performing exempt work. 29 CFR 541.503.
Drivers Who Sell
Drivers who deliver products and also sell such products may qualify as exempt outside sales employees only if the employee has a primary duty of making sales. In such cases, the driving, loading, and delivering of products is incidental to and in conjunction with the employee’s own outside sales or solicitations. Several factors are considered when determining if a driver is eligible for the outside sales exemption. They include, but are not limited to:
- a comparison of the driver’s duties with other employees engaged as truck drivers and salespersons;
- the possession of a selling or solicitor’s license when required by law or ordinances;
- whether there is a customary practice or contractual arrangements concerning the amount of products to be delivered;
- the job descriptions in a collective bargaining agreements;
- hiring qualifications;
- sales training;
- attendance at sales conferences;
- payment method; and
- proportion of earnings directly attributable to sales.
Examples of drivers who may qualify as exempt outside sales employees include:
- A driver who provides the only sales contact between the employer and the customers visited, who calls on customers and takes orders for products, who delivers products from stock in the employee’s vehicle or procures and delivers the product to the customer on a later trip, and who receives compensation commensurate with the volume of products sold.
- A driver who obtains or solicits orders for the employer’s products from persons who have authority to commit the customer for purchases.
- A driver who calls on new prospects for customers along the employee’s route and attempts to convince them of the desirability of accepting regular delivery of goods.
- A driver who calls on established customers along the route and persuades regular customers to accept delivery of increased amounts of goods or of new products, even though the initial sale or agreement for delivery was made by someone else.
Examples of drivers who generally would not qualify as exempt outside sales employees include:
- A route driver whose primary duty is to transport products sold by the employer through vending machines and to keep such machines stocked, in good operating condition, and in good locations.
- A driver who often calls on established customers day after day or week after week, delivering a quantity of the employer’s products at each call when the sale was not significantly affected by solicitations of the customer by the delivering driver or the amount of the sale is determined by the volume of the customer’s sales since the previous delivery.
- A driver primarily engaged in making deliveries to customers and performing activities intended to promote sales by customers (including placing point-of-sale and other advertising materials, price stamping commodities, arranging merchandise on shelves, in coolers or in cabinets, rotating stock according to date, and cleaning and otherwise servicing display cases), unless such work is in furtherance of the driver’s own sales efforts.
