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February 03, 2011
Did Overtime Exemption Apply to Workers with Auto Sales Responsibilities?

Three terminated employees filed suit to recover overtime compensation that they claimed they were due. However, their former employer argued that they were exempt from overtime either under the outside sales exemption or the automobile salesman exemption.

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What happened. Gil’s Auto Sales, Inc., sells automobiles, and Gold Car Lending, Inc., provides in-house financing for automobile purchases. In January 2008, “Matthew” was hired by Gil’s as a temporary employee. He became a regular employee 3 months later.

“Joyce” had been hired in February 2007, and “Brooke” had started in May 2007. There was conflicting evidence regarding whether Brooke and Joyce worked for Gold Car or whether the two companies were considered joint employers. The three workers’ job responsibilities varied but included sales of cars, as well as collections.

Matthew said he split his time “[a]bout 50/50” between selling and collecting payments. When he collected on delinquent accounts, he would contact customers who were late on payments and encourage them to pay. In cases where a customer refused to return a car after failing to pay, Matthew would try to locate the auto.

His other responsibilities included “load[ing] deals” onto the computer, washing and detailing cars, transferring cars between car lots, getting gas, taking bank deposits to Gil’s owner, and taking time cards to another Gil’s employee.

Joyce initially said she spent about 80 percent of her time on collections in a typical day, but then said it actually varied by week. “If I had to help sell cars, I sold cars. If I had to help collect, I collected. If I had to take payments, I took payments. If I had to go and fill cars up with gas, I went and filled cars up with gas,” she said. Her responsibilities sometimes entailed repossessing vehicles, verifying customers’ applications, and approving loans or purchases. She also kept and filed folders on customers who visited the store.

For about half of every workday, Brooke collected and called on accounts. She also took payments for customers and made customer files. She said she sold cars “[e]very so often.” All three workers received a bonus based on quarterly group sales (not individual sales), received a commission based on group sales, and were paid an hourly wage.

Joyce, Brooke, and Matthew were terminated on August 1, 2008. They filed complaints with the U.S. Department of Labor’s (DOL’s) Wage and Hour Division, claiming that Gil’s and Gold Car did not pay them overtime compensation—in violation of the overtime provisions of the Fair Labor Standards Act (FLSA). However, in a review of the time period between January 18, 2007, and January 15, 2009, the DOL found no such violations.

The three terminated workers filed suit against Gil’s and Gold Car, attempting to recover overtime compensation. The companies filed a motion for summary judgment.

What the court said. The U.S. District Court for the Middle District of Georgia denied the companies’ motion, saying that neither FLSA’s outside sales exemption nor the automobile salesman exemption applies in this case. The court also said that genuine disputes of material fact exist regarding whether the companies willfully violated the FLSA.

Regarding the outside salesman exemption, the court rejected the companies’ contention that the collection activities performed by Joyce, Brooke, and Matthew were considered to be “sales” under the FLSA. In addition, the court said that they “did not engage in any outside sales work, and thus, their collections on accounts cannot be incidental to outside sales.”

Similarly, the court disagreed with the companies that Joyce, Brooke, and Matthew fall into the FLSA exemption for automobile salesmen. It said that genuine disputes of material fact exist regarding whether they were primarily engaged in sales.

Finally, the court noted that the companies did not provide enough evidence to prove that the compensation paid to Joyce, Brooke, and Matthew “was substantially based on their sales success.” Williams, et al. v. Gold Car Lending, Inc., et al., U.S. District Court for the Middle District of Georgia, No. 4:09-CV-84 (CDL) (12/13/10)

Point to remember: Properly classifying workers can help employers avoid legal problems.

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