Opinion ID: 903301
Heading Depth: 3
Heading Rank: 1

Heading: The FLSA and related DOL regulations

Text: In 1938, Congress enacted the FLSA to “protect all covered workers from substandard wages and oppressive working hours.” Barrentine v. Ark.-Best Freight Sys., Inc., 450 U.S. 728, 739 (1981); see also 29 U.S.C. § 202(a). One of the FLSA’s requirements is that employers pay workers at one-and-a-half times their normal wages for hours worked in excess of forty per week. 29 U.S.C. § 6 Case: 12-10785 Document: 00512277491 Page: 7 Date Filed: 06/18/2013 No. 12-10785 207(a). The FLSA also requires that employees be compensated at a minimum average wage of $7.25 per hour. Id. § 206(a)(1). These requirements do not apply to all workers, however. See id. § 213. Relevant to this appeal is the exemption for workers “employed . . . in the capacity of outside salesm[e]n.” Id. § 213(a)(1). The logic of the exemption is that “[s]uch [a] salesman, to a great extent, works individually. There are no restrictions respecting the time he shall work and he can earn as much or as little, within the range of his ability, as his ambition dictates.” Jewel Tea Co. v. Williams, 118 F.2d 202, 207–08 (10th Cir. 1941). An outside salesman’s extra compensation comes in the form of commissions, not overtime, and because most of the salesman’s work is performed away from the employer’s place of business, the employer often has no way of knowing how many hours an outside salesman works. Id. at 208. Congress did not expressly define “outside salesman,” but it did authorize the Department of Labor to promulgate regulations defining the term and implementing other elements of the FLSA. 29 U.S.C. § 213(a)(1). According to those regulations, “[t]he term ‘employee employed in the capacity of outside salesman’” means any employee: (1) Whose primary duty is (i) making sales within the meaning of section [203(k) of the FLSA4], or (ii) obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and 4 Section 203(k) reads, in its entirety: “‘Sale’ or ‘sell’ includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” 7 Case: 12-10785 Document: 00512277491 Page: 8 Date Filed: 06/18/2013 No. 12-10785 (2) Who is customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty. 29 C.F.R. §§ 541.500(a)(1)–(2). Section 541.700 of the DOL regulations defines “primary duty” as “the principal, main, major or most important duty that the employee performs.” Id. § 541.700(a). Section 541.504 addresses the situation in which employees both deliver and sell products. The regulation provides a general overview followed by a list of factors to consider in determining if an employee is a deliveryman or an exempt outside salesman: (a) Drivers who deliver products and also sell such products may qualify as exempt outside sales employees only if the employee has a primary duty of making sales. In determining the primary duty of drivers who sell, work performed incidental to and in conjunction with the employee’s own outside sales or solicitations, including loading, driving or delivering products, shall be regarded as exempt outside sales work. (b) Several factors should be considered in determining if a driver has a primary duty of making sales, including, but not limited to: a comparison of the driver’s duties with those of other employees engaged as truck drivers and as salespersons; possession of a selling or solicitor’s license when such license is required by law or ordinances; presence or absence of customary or contractual arrangements concerning amounts of products to be delivered; description of the employee’s occupation in collective bargaining agreements; the employer’s specifications as to qualifications for hiring; sales training; attendance at sales conferences; method of payment; and proportion of earnings directly attributable to sales. 8 Case: 12-10785 Document: 00512277491 Page: 9 Date Filed: 06/18/2013 No. 12-10785 Id. §§ 541.504(a)–(b). The regulations further provide a list of examples of drivers who qualify as exempt outside salesmen: (1) A driver who provides the only sales contact between the employer and the customers visited, who calls on customers and takes orders for products, who delivers products from stock in the employee’s vehicle or procures and delivers the product to the customer on a later trip, and who receives compensation commensurate with the volume of products sold. (2) A driver who obtains or solicits orders for the employer’s products from persons who have authority to commit the customer for purchases. (3) A driver who calls on new prospects for customers along the employee’s route and attempts to convince them of the desirability of accepting regular delivery of goods. (4) A driver who calls on established customers along the route and persuades regular customers to accept delivery of increased amounts of goods or of new products, even though the initial sale or agreement for delivery was made by someone else. Id. §§ 541.504(c)(1)–(4). The final relevant portion of the regulations lists examples of drivers who do not qualify for the exemption: (1) A route driver whose primary duty is to transport products sold by the employer through vending machines and to keep such machines stocked, in good operating condition, and in good locations. (2) A driver who often calls on established customers day after day or week after week, delivering a quantity of the employer’s products at each call when the sale was not significantly affected by solicitations of the customer by the 9 Case: 12-10785 Document: 00512277491 Page: 10 Date Filed: 06/18/2013 No. 12-10785 delivering driver or the amount of the sale is determined by the volume of the customer’s sales since the previous delivery. (3) A driver primarily engaged in making deliveries to customers and performing activities intended to promote sales by customers (including placing point-of-sale and other advertising materials, price stamping commodities, arranging merchandise on shelves, in coolers or in cabinets, rotating stock according to date, and cleaning and otherwise servicing display cases), unless such work is in furtherance of the driver’s own sales efforts. Id. §§ 541.504(d)(1)–(3). Neither list of examples is exhaustive. We proceed first by applying the factors listed in 29 C.F.R. § 541.504(b) to Meza’s case. We then consider the relevance of the examples of exempt and nonexempt driver-salesmen listed in 29 C.F.R. §§ 541.504(c)–(d). Finally, we review the applicability of the relevant precedent in this and other circuits.