Opinion ID: 204689
Heading Depth: 2
Heading Rank: 1

Heading: The FLSA Outside Sales Exemption

Text: The FLSA imposes minimum labor standards on employers to promote the health, efficiency, and general well-being of workers. 29 U.S.C. § 202(a); Nigg v. U.S. Postal Serv., 555 F.3d 781, 784 (9th Cir.2009). The FLSA was enacted because Congress found that the existence `in industries engaged in commerce or in the production of goods for commerce' of labor conditions detrimental to maintaining minimum standards of living necessary for health, efficiency and general well-being of workers perpetuates substandard conditions among workers, burdens commerce, constitutes an unfair method of competition in commerce, leads to labor disputes, and interferes with the orderly and fair marketing of goods. Hale v. Arizona, 993 F.2d 1387, 1396 (9th Cir.1993) (en banc) (quoting 29 U.S.C. § 202(a)); see also Nigg, 555 F.3d at 784. To meet those goals and expand employment opportunities across the economy, the FLSA includes a baseline overtime payment requirement that employers must pay employees a rate not less than one and one-half times the regular rate at which he is employed for hours worked in excess of forty per week. 29 U.S.C. § 207(a)(1). There are numerous exceptions to this general rule. See 29 U.S.C. § 213. These exemptions to the overtime-pay requirement vary widely from white-collar executive, administrative, and professional exemptions to those for babysitters. 29 U.S.C. § 213(a)(1), (15). Relevant here is one part of the white-collar exemption for persons employed in the capacity of outside salesman. 29 U.S.C. § 213(a)(1); Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 946 (9th Cir. 2009). The white-collar exemption removes from the overtime pay requirement: any employee employed in a bona fide executive, administrative, or professional capacity . . . or in the capacity of outside salesman (as such terms are defined and delimited from time to time by regulations of the Secretary [of Labor]). . . . 29 U.S.C. § 213(a)(1). As the statute indicates, a proper interpretation of the FLSA is necessarily guided by the regulations issued by the Secretary of Labor[t]he FLSA grants the Secretary broad authority to `define and delimit' the scope of the exemption for executive, administrative, and professional employees. Auer, 519 U.S. at 456, 117 S.Ct. 905 (alterations and citation omitted). Congress did not define the term outside salesman or the other white-collar exemptions in the FLSA. Rather, [p]ursuant to Congress's specific grant of rulemaking authority, the [DOL] has issued implementing regulations, at 29 C.F.R. Part 541 [(Part 541)], defining the scope of the section 13(a)(1) exemptions. See Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 69 Fed. Reg. 22,122, 22,124 (Apr. 23, 2004). In 2004, the DOL's Wage and Hour Division promulgated supplemental rules concerning the outside sales and administrative exemptions (the 2004 Rule). Among other things, the 2004 Rule explained that the major substantive provisions of the Part 541 regulations have remained virtually unchanged for 50 years. 69 Fed.Reg. at 22,124. The Secretary defines an outside salesman as any employee: (1) Whose primary duty is: (i) making sales within the meaning of section 3(k) of the Act; 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 (2) Who is primarily 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). An employee's primary duty is the principal, main, major, or most important duty that the employee performs. 29 C.F.R. § 541.700. The outside sales regulation provides: In determining the primary duty of an outside sales employee, work performed incidental to and in conjunction with the employee's own outside sales or solicitations, including incidental deliveries and collections, shall be regarded as exempt outside sales work. Other work that furthers the employee's sales efforts also shall be regarded as exempt work including, for example, writing sales reports, updating or revising the employee's sales or display catalogue, planning itineraries and attending sales conferences. 29 C.F.R. § 541.500(b). The Secretary's outside sales regulation references Section 3(k) of the Act. 29 C.F.R. § 541.500(a). Section 3(k) provides that `[s]ale' or `sell' includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition. 29 U.S.C. § 203(k). The Secretary's regulations provide: Sales within the meaning of section 3(k) of the Act include the transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property. Section 3(k) of the Act states that sale or sell includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition. 29 C.F.R. § 541.501(b). In the regulations, the Secretary draws a distinction between sales work and promoting: Promotion work is one type of activity often performed by persons who make sales, which may or may not be exempt outside sales work, depending upon the circumstances under which it is performed. Promotional work that is actually performed incidental to and in conjunction with an employee's own outside sales or solicitations is exempt work. On the other hand, promotional work that is incidental to sales made, or to be made, by someone else is not exempt outside sales work. 29 C.F.R. § 541.503(a). To illustrate the concept of promoting sales, as opposed to selling, the Secretary's regulations provides two examplesa manufacturer's representative and a company representative who visits chain stores: (b) A manufacturer's representative, for example, may perform various types of promotional activities such as putting up displays and posters, removing damaged or spoiled stock from the merchant's shelves or rearranging the merchandise.. . . Promotion activities directed toward consummation of the employee's own sales are exempt. Promotional activities designed to stimulate sales that will be made by someone else are not exempt outside sales work. . . . (c) Another example is a company representative who visits chain stores, arranges the merchandise on shelves, replenishes stock by replacing old with new merchandise, sets up displays and consults with the store manager when inventory runs low, but does not obtain a commitment for additional purchases. The arrangement of merchandise on the shelves or the replenishing of stock is not exempt work unless it is incidental to and in conjunction with the employee's own outside sales. Because the employee in this instance does not consummate the sale nor direct efforts toward the consummation of a sale, the work is not exempt outside sales work. 29 C.F.R. § 541.503(b)-(c). In a FLSA overtime-wage case, the question of how an employee spends his or her workday is one of fact, while the question of whether his or her activities exclude him or her from the overtime-pay requirement is one of law. See Icicle Seafoods v. Worthington, 475 U.S. 709, 714, 106 S.Ct. 1527, 89 L.Ed.2d 739 (1986); Bratt v. Cnty. of Los Angeles, 912 F.2d 1066, 1068 (9th Cir.1990). Although the outside sales exemption is more than seven decades old, our encounters with the exemption are few and limited to the class-certification context. See In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953 (9th Cir.2009); Vinole, 571 F.3d at 939, 945. Thus, whether a PSR's job duties make him or her an outside salesperson is a question of first impression for our court. We construe the outside sales exemption consistent with other Section 13(a) exemptions under the FLSA. The employer always has the burden of showing the exemption applies to its employee. Bratt, 912 F.2d at 1069; see also Nigg, 555 F.3d at 788. The exemption can only apply to persons plainly and unmistakably within [its] terms and spirit. Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S.Ct. 453, 4 L.Ed.2d 393 (1960); Klem v. Cnty. of Santa Clara, 208 F.3d 1085, 1089 (9th Cir.2000). Because exemptions are narrowly construed against the employer, to meet its burden, an employer must establish that the employee satisfies each of the criteria set forth in the Secretary of Labor's regulations. See Bratt, 912 F.2d at 1069; see also Wang v. Chinese Daily News, Inc., 623 F.3d 743, 751 (9th Cir. 2010). Reviewing a FLSA exemption is well understood to be a fact-intensive inquiry. Vinole, 571 F.3d at 945 (citation omitted).