Here’s why so many employers make a mess of the overtime rules.


Employment lawyers often quip that they could walk into a workplace and spot at least one violation of the Fair Labor Standards Act (FLSA), the federal law governing the payment of overtime pay at not less than time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek.

One of the lowest-hanging fruits is misclassification, like treating an otherwise overtime-eligible employee as exempt. The FLSA provides an exemption from minimum wage and overtime pay for employees employed as bona fide executiveadministrativeprofessionalcomputer, and outside sales employees. These narrow exemptions apply only when an employee’s specific job duties and salary satisfy certain requirements.

Let’s look at the outside sales exemption. To qualify for it, the employee’s primary duty (i.e., the principal, main, major, or most important duty that the employee performs) must be making sales, or obtaining orders or contracts for services or for the use of facilities for which a client or customer will pay the consideration.

I’ll give you an example.

In this recent Fourth Circuit decision, the plaintiffs were three sales representatives who alleged that their employer, a food-products distributor, failed to pay them overtime. The defendant countered that the plaintiffs fell within the “outside sales” exemption because they worked outside the office, and their primary duty was making sales.

The FLSA determines an employee’s primary duty based on all the facts in a particular case, mostly the character of the employee’s job as a whole. For outside sales, incidental work is part of the primary duty of making sales. But promotional work that is incidental to sales made, or to be made, by someone else does not.

Here, the defendants failed to establish that the plaintiffs generally could make their own sales; instead, they simply submitted orders to fill space or stock displays that the company’s management had already negotiated. Most upselling, which was sporadic anyway, was “ancillary to sales representatives’ primary responsibility” of “keeping shelves full, keeping shelves clean, and placing orders promptly,” all incidental to sales “already negotiated and executed” by company management. For these reasons, the court concluded that the plaintiffs’ “overall primary duty” could not be making sales. Thus, no exemption applies, and the plaintiffs are overtime-eligible.

The “primary duty” isn’t unique to the outside sales exemption. For example, employers invoking the administrative exemption must establish that the primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

The primary duty concept is also fact-specific. If it’s been a while since you’ve audited your pay practices (e.g., exempt vs. nonexempt, employee vs. independent contractor), consider doing so and engaging outside employment counsel to assist. Federally, the penalties can be steep (liquidated damages of 100%), and the statute of limitations can extend to three years.

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