Much confusion exists among employers about how to apply the Fair Labor Standards Act exemption for employees primarily performing sales duties. In a trio of decisions issued last month, a federal judge in the United States District Court for the Eastern District of Virginia has clarified the standard under which employers may properly classify outside sales employees as exempt. The FLSA requires that most employees in the United States be paid at least the federal minimum wage (currently $7.25) for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. Certain outside sales employees are exempt from the FLSA if:
In three separate cases involving the same employer, former mortgage loan officers filed suit alleging that their employer misclassified them as exempt employees under the outside sales exemption to the FLSA. Dixon v. Prospect Mortg. LLC; Cougill v. Prospect Mortgage, LLC; Hartman v. Prospect Mortg., LLC. The primary issue in each case was whether the former employees were "customarily and regularly" engaged in work away from the employer's place of business. The court decided that "customarily and regularly" does not mean the majority of the time, or a particular percentage of working time away from the employer's place of business. Rather, the court held that, the relevant question is whether the employee performs tasks critical to the sales process away from the office on a greater than occasional basis.
Based on the evidence presented, the court found that the employer properly classified the employees as exempt outside sales employees in two of the three cases. These decisions confirm that sales employees do not need to work away from the office the majority of the time to qualify for the FLSA outside sales exemption. The cases also reinforce the importance of regular audits of employees' job duties and FLSA classifications. Job titles do not determine exempt status. In order for an exemption to apply, employers must insure that the tasks their employees perform fit well within the exemption.