Second Circuit Refines the Definition of the Outside Salesperson Exemption

In Flood v. Just Energy Mktg. Corp., the Second Circuit Court of Appeal recently addressed what qualifies an employee for the outside sales exemption under the Fair Labor Standards Act (FLSA). Generally, the outside sales exemption is based on an employee’s primary duties – making sales or obtaining orders for contracts or services, while customarily and regularly engaged away from the employer’s place of business.

There, an employee was engaged in door-to-door sales to have customers buy electrical or natural gas energy from the employer. Sales were completed when the employee had customers sign an agreement to purchase energy, and the employee’s pay was based purely on commissions related to the sales he made.

The Department of Labor (“DOL”) has made clear that “[e]mployees have a primary duty of making sales if they obtain a commitment to buy from the customer and are credited with the sale.” The employee claimed that because the employer retained discretion to reject the contracts that he secured from customers, among other supervisory rules, he did not qualify for the overtime exemption status. However, the Second Circuit stated that the outside salesman exemption does not require a “showing that a selling employee has an unconditional authority to bind the buyer or his employer to complete the sale,” and the “absence of substantial supervision has never been a pre-condition to the application of the outside salesman exemption.”