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Must we pay overtime to telemarketers?

by on
in Compensation and Benefits,Human Resources

Q. Historically, we do not pay overtime to our commissioned telemarketers. After all, they are paid strictly on commission, not by the hour. Some employees are now complaining that we are paying them illegally by not paying overtime for weeks in which they work more than 40 hours. Are they right?

A.
Yes, the employees are correct. The FLSA has two different exemptions that could cover salespeople: the outside sales employee exemption and the commissioned retail employee exemption. Neither covers your inside telemarketers. 

To qualify for the outside sales employee exemption, both of the following conditions must be met:

  1. The employee’s primary duty must either be making sales, or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer.
  2. The employee must be customarily and regularly engaged away from the employer’s place or places of business.

Notably, outside sales usually do not include sales made by mail, telephone or the Internet.

To qualify for the commissioned retail employee exemption, all three of the following requirements must be met:

  1. The employee must be employed by a retail or service establishment.
  2. The employee’s regular rate of pay must exceed 1.5 times the applicable minimum wage.
  3. More than half of the employee’s earnings must be in the form of commissions.

This exemption will probably not apply to your telemarketers because a telemarketing operation is not a customary retail establishment.

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