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Beware the Overtime Trap that Even Tripped up the Army

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Fair Labor Standards Act (FLSA) regulations say that certain kinds of "outside" salespeople are exempt from the FLSA's overtime provisions.

But to qualify as exempt, a salesperson must be “actively engaged in activities directed toward the consummation of his own sales, at least to the extent of obtaining a commitment to buy from the person to whom he is selling.”

 As the following case shows, that test can be a high hurdle

Recent case: Gary Clements and David Gerber took jobs for a military contractor hired to help the Army and Army Reserve meet enlistment goals. The two were paid a flat rate of $600 per week, plus bonuses for every recruit who actually signed the oath of service. They frequently worked more than 40 hours per week. They were not, however, paid overtime.

Clements and Gerber sued, claiming their employer owed them overtime pay. The contractor claimed that they met the outside salesperson exemption, reasoning that every successful recruitment was a “sale.”

But neither Clements nor Gerber could actually sign up potential recruits. They had to take recruits to an Army facility, where military personnel tested and counseled the potential soldiers and then had them sign the oath.

The court said the recruiters were not outside salespersons because they were not the ones who sealed the deals—they merely laid the groundwork. That meant they were entitled to overtime pay. (Clements, et al. v. Serco, No. 06-4316, 10th Cir., 2008)

Final note: Other examples of sales staff that don’t meet the exemption:

  • Magazine salespersons who go door to door to pitch subscriptions, but who have a sales manager who signs the contracts
  • College recruiters who can’t offer admissions.

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