There Are Few Areas of the Law as Complex as Overtime Exemptions
The FLSA is the Fair Labor Standards Act, a federal statute established in 1938 that outlined a minimum wage, overtime pay and maximum hour amount for a workweek. It’s standards apply to all employees unless the employer can claim an exemption for the employee’s coverage.
There are numerous complex FLSA exemptions. These FLSA exemptions include the following:
- Executive Employees
- Administrative Employees
- Professional Employees
- Employees in Computer-Related Occupations
- Outside Sales Employees
- Salary Basis Requirement and the Part-541 Exemptions
- Highly-Compensated Workers
- Administrative Duties Tests
Some of the more common exemptions are discussed below.
The Outside Sales Exemption
The overtime provisions of the FLSA do not apply to any employee “employed in the capacity of outside salesman,” as covered by the “Outside Sales Exemption” outlined in 29 U.S.C. § 213(a)(1). Courts have explained that the logic of the exemption is that. . .[a] salesman, to a great extent, works individually. There are no restrictions respecting the time he shall work and he can earn as much or as little, within the range of his ability, as his ambition dictates. . . . An outside salesman’s extra compensation comes in the form of commissions, not overtime, and because most of the salesman’s work is performed away from the employer’s place of business, the employer often has no way of knowing how many hours an outside salesman works.
While Congress did not expressly define”outside salesman,” in the statute, the Department of Labor has promulgated regulations relevant to the exemption. See 29 U.S.C. § 213(a)(1). An outside salesperson is defined by regulation as an employee:
- (1)Whose primary duty is: (i) making sales within the meaning of section 3(k) of the Act, or (ii) 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
- (2)Who is customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty.
C.F.R. § 541.500(a).
Is it the Employee’s Primary Duty?
An employee’s primary duty is important for a Court’s analysis of an overtime issue. For purposes of the “primary duty” prong, the FLSA defines “sale”or “sell” to include “any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” 29 U.S.C. § 203(k). Regulations on the Outside Sales Exemption provide that “[s]ales within the meaning of section 3(k) of the Act include the transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property.” 29 C.F.R. § 541.501(b). As for “primary duty,” the regulations provide that the term “means the principal, main, major or most important duty that the employee performs.” Id. § 541.700(a).
Our Lawyers Will Determine Whether an Employee has Been Misclassified
Often, however, companies intentionally misclassify an employee to rob that employee of earned wages and overtime. To determine whether an employee has been misclassified as exempt from the overtime laws, our attorneys will conduct extensive research and draw upon their extensive experience in handling overtime claims. In fact, our law firm commonly litigates overtime claims based on intentional misclassification, including large collective actions filed against large corporations, seeking unpaid overtime for numerous misclassified employees.
A Common Example of Improper Classification
There’s an infinite amount of problems that occur when applying the FLSA. Tipping can be one problem area. Under the FLSA, an employer must pay its employee a minimum wage. See 29 U.S.C. § 206(a). That wage may include the employee’s tips. See id. § 203(m). That is, an employer may pay an employee a cash wage below the minimum wage, so long as the employer supplements the difference with the employee’s tips; this is known as an employer taking a “tip credit.” 29 U.S.C. § 203(m). If an employee receives tips pursuant to a tip pooling system, the tip pool may only include customarily tipped employees. Id. If an employee challenges the validity of a tip pool, the employer has the burden of proving it complies with the FLSA.
Contact Our Overtime Lawyers
If you believe you have an exemption issue, we can help. Please call us for our opinion on whether you or your business are exempt from the overtime provisions.