How to Apply New Federal Overtime Rule to Outside Salespeople

Does the new federal salary requirement apply to our outside salespeople who receive a monthly salary? No. Neither federal nor California law require the payment of either minimum wage or overtime for an outside salesperson position that meets certain duties tests. The federal overtime rule taking effect on December 1, 2016 under the Fair Labor Standards Act (FLSA) applies to the Executive, Administrative, and Professional exemptions that are subject to a salary basis test.

Under the federal outside sales duties test, to qualify for the outside sales employee exemption, all the following duties requirements must be satisfied:

• The employee’s primary duty must be making sales or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer. "Sales" includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition. It includes the transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property; and

• The employee must be customarily and regularly engaged away from the employer’s place or places of business.

California defines an outside sales position as follows:

"Any person, 18 years of age or older, who customarily and regularly works more than half the working time away from the employer’s place of business selling tangible or intangible items or obtaining orders or contracts for products, services, or use of facilities."

Although the federal definition requires an employee only to meet a "primary duty" test, note that in California an employee must perform the outside sales duties more than half the time to be exempt.

If your outside salesperson positions meet the above criteria, their salary is not subject to either the new or previously existing salary basis tests.