Question: We have a sales rep who spends the bulk of her time in the office making phone and Internet sales and four times a year she attends trade shows out of state to meet face to face with a lot of our customers. Her territory is growing and she is beginning to work more than 40 hours a week and is asking for overtime pay.
We do not believe she is entitled to overtime because she receives sales commissions, but she is insistent. What can we tell her?
Answer: She is right. She is entitled to overtime pay for all hours worked over 40 each week. There are only five white collar exemptions from overtime pay and only one covers sales representatives. Since she works in a sales capacity, the only way for her position to be exempt from overtime pay under state and federal law requirements is if she works as an “outside” sales representative. “Outside” sales reps make sales at the customer’s place of business or, if selling door-to-door, at the customer’s home, and spend the majority of their working time away from the employer’s office.
Outside sales does not include sales made by mail, phone, or Internet unless such contact is used merely to assist with personal outside sales calls.
The issue of how she is paid is irrelevant to the situation. There are many employees who are paid by commission and remain non-exempt; this means they must track their time and are entitled 1.5 times their regular pay for all hours worked beyond 40 in a workweek.
Since her pay is irregular due to her commission status, the overtime rate must be calculated weekly by dividing her total weekly commissions by the number of hours she worked that week. The overtime rate will be 1.5 times that calculated rate. Since her work status is hourly, her regular rate of pay can never be below the Washington state minimum wage ($11.00) or the applicable Seattle minimum wage if she works in Seattle.
The bottom line is “Inside” Sales Reps will not qualify for exempt status under the administrative, executive or professional – white collar exemptions. Inside Sales Reps are all eligible for overtime pay.
Source: Archbright HR Hotline
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