Written by Galen T. Shimoda, Justin Rodriguez, and Cassandra Shaft
The California “outside sales exemption” from the requirement to pay overtime is very specific, narrow exemption that can often be misapplied to those who work in the sales field. The absolute bottom line is that in order for an employee to fall under this exemption means that they have to spend a minimum of 50% of their time away from their main office “selling” a good or service. Being classified as exempt can have a huge impact on the amount of wages an employee takes home as being “exempt” means an employee is not entitled to overtime, meal and rest periods, or the requirement to be paid at least the minimum wage for every hour worked. As a result, knowing whether or not you are properly classified is crucial.
As mentioned above, California law imposes a strict, quantitative standard for determining whether an employee is entitled to overtime, requiring that the employee spend more than 50% of the time conducting sales activities. In addition, the primary purpose, or the most important aspect of the employee’s job, must be to make sales. For example, say an employee’s job is to deliver water bottles to private homes and businesses and while he is out delivering the water bottles he is supposed to try to sell other products. This will not qualify under the outside sales exemption because the “sales” part of the job is too minor and was not the main focus of the employee’s job (delivering water bottles). In contrast, the traditional door-to-door salesperson who spends the majority of their time attempting to make sales and following up on leads would most likely qualify under the exemption. In addition, California courts have decided that any support or preparation activities that are “incidental” or “secondary” to sales do not count toward the 50% time requirement needed to qualify for the exemption.
Some employers may try to argue that whether or not their employee actually spends 50% of their time or more making sales is irrelevant, that they are still realistically expected to spend the majority of their time on sales work. California courts have said that in order to prove the realistic expectations for a job there has to be some clear outline or guideline that the employee was supposed to follow. Also, courts will look to see if an employee was written up or disciplined in some way for not meeting their employer’s expectations. For example, if an employee who was hired to travel at least 50% of the time to different doctors’ offices to sell pharmaceuticals, but they did not meet that goal because of their own demonstrated failure to actively procure and act upon sales leads, then a court may decide that the employer realistically expected them to be out of the office for at least 50% of the time generating sales.
Ultimately, if, in actuality, an employee is not spending 50% of their time away from their main place of business engaged in sales, there is a good chance they will not qualify for the “outside sales exemption” under California Law. If you are not sure whether you are properly classified at your place of employment, please contact our office.