Despite well-established law, many employers do not realize that "inside" salespersons typically do not qualify for the Part 541 White Collar overtime exemptions. A decision last week from the Second Circuit Court of Appeals illustrates why the Administrative exemption will not work for salespersons. In Reiseck v. Universal Communications of Miami, Inc., the plaintiff sold magazine ads under a salary plus commission arrangement. She was not paid overtime, and sued, alleging violation of the Fair Labor Standards Act and state law.
The Second Circuit concluded that the plaintiff was not exempt from the FLSA's overtime requirements. As a salesperson, her primary duties did not involve work "directly related to management policies or general business operations." The employer claimed that the plaintiff was exempt because her job involved sales promotion activities. Sales work is considered production rather than administrative support duties, and will disqualify the employee from claiming the exemption. In addition, sales promotion was ancillary to generating actual sales, and was also considered production work.
Employers have several options for controlling overtime by inside salespersons. Some commissioned retail and service salespersons may qualify for a separate exemption. For others, many employers use an alternative pay plan whereby the employee is paid only a half-time overtime premium based on total compensation for the workweek. However, simply classifying inside salespersons as exempt from overtime requirements invites a DOL complaint or lawsuit.