Outside Sales Exemption

An outside salesperson, or outside sales representative, is an employee that spends most of their work time outside of the office, selling products and obtaining orders and contracts from clients. Pharmaceutical sales reps, insurance salespersons, commissioned delivery drivers, and manufacturing representatives who market and merchandise retail are examples of outside sales employees.

Most outside salespersons are exempt from the Fair Labor Standards Act (FLSA), federal labor law that requires employers to provide minimum wage and overtime pay to their employees.

Many outside sales employees are also exempt from California labor laws requiring employers to provide meal and rest breaks, minimum wage, and overtime pay to their employees.

Improperly classifying outside sales employees as exempt is a violation of both federal and state labor law. Outside sales employees who have been improperly classified may be entitled to back wages, overtime pay, and other damages dating back several years of employment.

Are You Classified Correctly?
If you believe you’ve been intentionally or inadvertently improperly classified as an outside sales employee, you may be eligible to file a wage claim to recover your damages.

Understand your rights as a worker. Call toll-free (800) 254-9493 or fill out the form to speak with an employment attorney about your potential wage claims. All consultations are free and confidential.

We Get Results for Employees

Acosta $9.9 million for unpaid overtime and business expenses
Spansion $8.5 million for employees laid off without proper notice
Masco Backpay for workers who were misclassified
Fleetwood Backpay for employees laid off without proper notice
Cosmo $1 million for merchandisers who were not compensated for off-the-clock work
First Franklin Backpay for workers who were not paid overtime

Outside Sales Checklist

Outside sales employees are considered exempt under both federal and California labor law when the following two conditions are met:

  1. The employee’s primary duty is to sell tangible or intangible items or to obtain orders or contracts for services from clients
  2. The employee performs their primary duty away from the employer’s place of business

There are no salary requirements for the outside sales exemption.

Differences: Federal & California Outside Sales Law

Primary Duty

Under federal law, an outside sales employee may be considered exempt if the principal or most important duty that the employee performs is exempt work.

Under California labor law, an outside sales employee must spend more than half of their work time on exempt duties to be considered exempt.

Work that is “Incidental To” and Performed “in Conjunction With” Sales

An outside sales employee’s work is considered exempt under the FLSA if it is incidental to the employee’s sale or performed in conjunction with the sale. For example, an employee’s time spent promoting a product they are also selling door to door is exempt under the FLSA.

In California, however, work that is incidental to the employee’s sale or performed in conjunction with the sale is not considered exempt. For example, an employee’s time spent loading a truck and delivering purchased items is not exempt under California labor law.

What Activities Count as Exempt Sales?

“Sales” is broadly defined by both the federal and California outside sales exemptions to include the sale or exchange of any tangible items – such as office equipment or a home security system – as well as intangible items, such as an insurance policy or a warranty plan.

“Sales” can also include:

  • Contracts and agreements to sell items
  • Transfer of title
  • Consignments and shipments for sale
  • Orders for the use of facilities
    Here, “facilities” may include media airtime and digital and print advertising space, in addition to physical locations and transport vehicles.
  • Orders for services
    Employees who sell or take orders for particular services, such as moving, may be considered exempt even if they don’t perform the service.

Where Sales Happen Matters

Exempt outside salespersons spend most of their time selling products and services away from their employer’s place of business at customers’ homes and businesses.

Any headquarters or fixed location from which the exempt employee sells is considered the employer’s place of business, even if the employer doesn’t own or lease the property. For example, an outside salesperson’s home office may be considered the employer’s place of business.

Sales made by mail, phone, or over the internet typically do not qualify as exempt outside sales activity unless they are done in conjunction with an in-person sales call.

Drivers Who Sell

Delivery drivers may or may not be considered exempt sales employees under federal and California labor law. Generally, drivers qualify as exempt sales employees when their primary duty is making sales.

Other considerations may apply when determining exempt status for delivery drivers.
Under federal law, work that is incidental to and performed in conjunction with the driver’s sales – such as loading a truck and delivering goods – is considered exempt. Work that is incidental to and performed in conjunction with sales is not exempt under California labor law, however.

Additional factors affecting exempt status for drivers include:

  • Whether the driver has a solicitor’s license
  • Whether the driver received sales training
  • The driver’s method of payment and the proportion of the driver’s earnings which can be attributed directly to sales
  • The driver’s job description in collective bargaining agreements

Difference Between Inside & Outside Sales

Outside sales are made in person at customers’ homes and businesses; inside sales are made remotely, or from the employer’s place of business, via mail, phone, or internet.

The federal and California inside sales exemptions may apply to certain employees who sell remotely.

Our Employment Experience

Our employment attorneys have been representing classes of employees in state and federal litigation against their employers for over 20 years.

We have successfully litigated employment cases concerning unpaid overtime, meal breaks, and business expenses; employee misclassification; and mass layoffs without proper notice, recovering millions of dollars on behalf of our clients against some of the world’s largest corporations.

Girard Gibbs has been recognized a Tier-1 law firm by U.S. News – Best Lawyers consecutively since 2013, and founders Daniel Girard and Eric Gibbs have been named among the Best Lawyers in America consecutively since 2012.

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