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May 04, 2009
Did She Fall Under "Outside Salesperson" Exemption?
A Florida title insurance saleswoman had an employment agreement with the company that hired her in 2004, and for which she worked for 6 months. After leaving the company, she sued for overtime, charging that she did not fall under the “outside salesperson” exception in the Fair Labor Standards Act (FLSA).

What happened. “Gabrielle” was hired by First Title of America, doing business as All Florida Title, as a marketing executive. She had prior experience in selling title insurance, through realtors, lenders, and brokers to end users, or borrowers. At first she was paid $1,000 per week by First Title, but she asked to be paid commissions only, earning 50 percent of all orders for title insurance from her clients that closed with First Title. Her job description charged her to “provide the services for referring and closing title insurance....”

The court opinion in this case doesn’t tell us why Gabrielle left First Title after only 6 months, but she sued for violation of her rights under FLSA, claiming that she wasn’t really an outside salesperson, and thus not exempt from the requirement to be paid time-and-a-half for hours worked over 40 per week. She noted that she had normally worked at least 50 hours every week and sought both back pay of $10,000 and $280,000 in commissions for the 2 ½ years remaining on her employment agreement.

The portion of FLSA to which she referred excludes from the exemption employees that do “promotional work that is incidental to sales made, or to be made, by someone else.” A federal district court judge reviewed the FLSA and ruled against her. Gabrielle appealed to the 11th Circuit, which covers Alabama, Florida, and Georgia.

What the court said. Appellate judges first noted the preamble to the most recent Department of Labor (DOL) regulations regarding outside salespeople: “The Department agrees that technological changes in how orders are taken and processed should not preclude the exemption for employees who in some sense make the sales. Employees have a primary duty of making sales if they ‘obtain a commitment to buy.’”

They also looked at a legal case involving military recruiters and a DOL opinion letter involving college recruiters: Because the military and the college must ‘close the sale,’ neither recruiters were seen as outside salespeople. But Gabrielle’s job was not like that of the recruiters, and judges affirmed that she was exempt. Gregory v. First Title of America, U.S. Court of Appeals for the 11th Circuit, No. 08-10737 (2009).

Point to remember: If a salesperson is paid commissions, as Gabrielle was, or otherwise credited with sales, it’s likely he or she is exempt.

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