USDL Opines On Outside Sales Employee Exemption

by Labor & Employment Group

(402) 341-3070

Recently the United States Department of Labor, Wage and Hour Division, issued an Opinion Letter of interest to any employer who employs sales persons. The Opinion Letter provides some insight on how USDL views the outside sales employee exemption contained in Section 13(a)(1) of the Fair Labor Standards Act, and the overtime statute.

Under Section 13(a)(1), an outside sales employee is one whose primary duty is making sales and who “is customarily and regularly engaged away from the employer’s place or places of business.” By exclusion, employees making sales at a fixed location, most particularly the employer’s place of business, cannot qualify as exempt from overtime compensation, as the exemption only applies to those sales persons who are “on the road” seeing customers, or making sales away from a fixed and constant location. Indeed, any fixed site, be it a home or office, used by a sales person as a headquarters, is considered one of the employer’s places of business. A “primary duty,” moreover, is the principal, main, major, or most important duty  that  the employee performs.

The outside sales employee does not lose the exemption by displaying the employer’s products at a trade show of a short duration (i.e., one or two weeks), as trade shows are not considered an employer’s place of business. Work which is performed incidental to the employee’s outside sales or solicitations, including collections, qualifies as exempt work, as does attending sales conferences.

An employee who meets the test of an outside sales person is exempt from overtime under the Fair Labor Standards Act. Inside sales persons, or those who do not qualify for the outside sales exemption, are not exempt and must be paid time and one-half their regular rate of pay for all hours worked in excess of 40 during any given workweek unless they qualify under a separate exemption for certain commissioned sales persons employed in retail service establishments.

Compensability of On Call Time

Many employers require maintenance or other employees to be “on call” during off-shift hours or over weekends. Questions frequently rise as to whether such employees must be paid for the time they spend “on call.”

The United States Supreme Court has previously explained that where an employee has been hired to spend time waiting to respond to an employer’s needs, the employee is described as having been “engaged to wait” and such time constitutes compensable work. However, where restrictions on the employee’s activity do not prevent them from engaging in their normal pursuits, they are described as “waiting to be engaged” and that time is not compensable. The trick is to find where the line is drawn between “engaged to wait” and “waiting to be engaged.”

In a recent Opinion Letter, the United States Department of Labor, Wage and Hour Division, evaluated whether employees of an ambulance rescue service had to be paid for time spent “on call.”  The Opinion Letter noted that the employees were required to be on call during a daily four-hour period five days a week. While on call, the employee had to stay within a specific area, and must be able to respond, with the ambulance, within eight minutes. During the winter months, the employees could be called every day, while in the summer months, the calls may be limited to once or twice a week.

The Wage and Hour Division noted that federal courts, when evaluating whether an employee could use their on call time effectively for their personal activities, considered such things as the geographical restrictions on an employee’s movements; the frequency of being called; whether a fixed time limit for response was unduly restrictive; whether the employee could easily trade on-call responsibilities; whether use of a pager could ease the restrictions; and whether the on-call policy was based on an agreement between the parties. In applying those factors, courts have held that technicians required to respond within ten or fifteen minutes, and who received three to five such calls during a fifteen-hour shift had to be paid for such time, as the response time and frequency of calls unreasonably restricted the employee’s movements. Another court held that on call time was not compensable where nurses had to be reachable by telephone or beeper; had twenty minutes to report if called; and typically didn’t receive more than one call per shift. In that case, the court concluded that the nurses could otherwise pursue a virtually unlimited range of activities in town or at home, including playing sports, going shopping, and visiting friends and neighbors.

Applying those factors to the case at hand, Wage and Hour held that the ambulance rescue drivers had to be paid while “on call” during the winter months due to the frequency of calls and the short response time. On the other hand, USDL held the employees need not be paid on call time during the summer months where the ambulance drivers received calls only once or twice per week.

In order to avoid having to compensate employees for time spent being “on call,” employers should either try to avoid imposing short response times or limit the frequency with which an employee is summoned, perhaps by having more than one employee on call at the same time in order to limit the frequency with which a given employee’s otherwise free time is interrupted.

If you would like a copy of either Opinion Letter, please contact us.

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