It’s time to take a fresh look at how you classify your sales and administrative employees—because attorneys across New York will be on the lookout for good class-action lawsuits in the wake of a recent decision by the 2nd Circuit Court of Appeals.
In January, the court ruled on whether employees who perform some sales functions can be classified as exempt administrative employees or must be paid overtime.
Recent case: Lynore Reiseck worked as a regional sales director for Universal Media, which publishes Elite Traveler magazine. She was classified as an exempt administrative employee, earning a base salary, plus commissions.
When she was fired in 2004, Reiseck sued, alleging that she should have been classified as an hourly employee, and thus eligible for overtime. She said her primary duty was selling advertising.
The 2nd Circuit Court of Appeals observed that when the Fair Labor Standards Act ( ) was enacted in 1938, businesses were generally categorized as either manufacturers or retailers. It said the law never explicitly considered service companies such as Universal Media.
The court then concluded that advertising salespeople such as Reiseck aren’t administrative employees.
To support this conclusion, the court looked at traditional retail situations. For example, in a clothing store, employees who approach walk-in customers, assist them and then ring up sales are salespersons. But workers who design advertising are administrative employees. Both kinds of employees drive sales, but only the on-the-floor staff actually sells things.
The court said an employee—such as Reiseck—making specific sales to individual customers is a salesperson for the purposes of the FLSA, while an employee encouraging an increase in sales generally among all customers is an administrative employee.
A district court will now decide whether Reiseck should have received overtime pay. (Reiseck v. Universal Communications, No. 09-CV-1632, 2nd Cir., 2010)
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