In a recent decision from the United States Court of Appeals for the Sixth Circuit, Hurt v. Commerce Energy, Inc., No. 18-4058, the Court found that not all door-to-door salespeople meet the “outside salesman” exemption of the Fair Labor Standards Act (FLSA).
In this case, the employees brought wage and overtime claims against Just Energy. Just Energy considered the employees to be exempt under the “outside salesmen” exemption. The Court ultimately ruled that this exemption did not apply for several reasons.
The Court used Department of Labor (DOL) regulations to define an outside salesperson as someone “customarily and regularly engaged away from the employer’s place or places of businesses,” whose primary duty is either (1) “making sales” or (2) “obtaining orders or contracts for services.”
The Court focused primarily on the first duty “making sales.” Employees would travel a door-to-door route pre-determined by the employer. The employee would engage with the potential customer and hopefully get the customer to sign a customer agreement. The employee would then have to call a verification number from the customer’s phone and then leave the customer’s premises while the customer completed the verification call.
The employee was not allowed to have any further contact with the customer after the verification call. The employees were paid exclusively on commission, which would normally indicate they are not employees, but because Just Energy had the authority to decline any potential sale for any reason whatsoever the Court determined that the employees were not “making sales” as the exemption requires.
As for the second element, “obtaining orders or contracts for services,” the Court quickly dismissed as Just Energy was not selling services, but consumer products in the form or natural gas and electricity.
The key takeaway from this case is to ensure that your business is properly classifying your employees. Courts will take all of the facts into consideration when determining whether workers qualify for an FLSA exemption and it is the business owner’s responsibility to prove that an exemption applies.
The full text of the opinion can be found at:
https://law.justia.com/cases/federal/appellate-courts/ca6/18-4058/18-4058-2020-08-31.html
