U.S. DOL Issues Opinion Letters on Outside Sales, FLSA Exemptions, and Third-Party Wage Payments

The U.S. Department of Labor (DOL) issued five new opinion letters in late June 2020, addressing potential exemptions under the Fair Labor Standards Act (FLSA).  A summary of key concepts from these letters is listed below.

FLSA2020-6: Mobile Sales People and Outside Sales Exemption

The FLSA exempts outside sales people from FLSA minimum wage and overtime requirements if they meet two requirements: (1) their primary duty must be making sales, and (2) they are customarily and regularly engaged in performing that duty away from the employer’s place of business.

The DOL Wage and Hour Division (WHD) indicated that a sales employee who is given employer-owned mobile assets (e.g., stylized truck, marketing displays, and demonstration units) to use as marketing tools to complete their own sales at various locations satisfies these criteria. Although the mobile sales person spends a significant portion of time driving and operating out of the employer-owned stylized truck, the truck itself does not constitute a fixed site or a place of business.

FLSA2020-7: Third-Party Wage Payments

Compensation paid to an employee from a third party may constitute wages under the FLSA if the employer and employee have an express or implied agreement to treat it as such.  In FLSA2020-7, employees engaged as automotive sales consultants were eligible to receive incentive payments from third party dealerships.  The WHD concluded that these third-party payments qualified as wages for the purposes of meeting the employer’s minimum wage requirements.  The incentive payments successfully met the following criteria: (1) the requirements to earn the pay were known in advance to the employees prior to performing the relevant work; (2) the payments were for a reasonably specific amount; and (3) the employer’s facilitation of the payment is more involved than simply serving as a “pass through” vehicle (e.g., processing tips).  In this case, the employer facilitated the payments by communicating the incentive program to the sales employees and working with third-party program sponsors to determine when payments would occur.

FLSA2020-8: Outside Sales Exemption for Temporary Retail Sales Locations

Unlike FLSA2020-6, this opinion letter examined the outside sales exemption in the context of salespeople who travel to various retail operations, such as trade shows and county fairs, and operate from said location for several days.  The WHD confirmed that salespeople traveling to and working at trade shows and fairs can still meet the aforementioned criteria: (1) the retail locations are not fixed and are typically used for a limited timespan; and (2) the sales employees are still engaged in “making sales” by pitching and securing sales directly to the consumers attending the retail locations.

FLSA2020-9: Emergency Management Coordinators and Learned Professional/Administrative Exemptions

This FLSA letter requested information on whether or not a public county emergency management coordinator could qualify for the learned professional or administrative exemption.  The WHD did not comment on whether the coordinator position could qualify for the learned professional exemption, but did analyze whether the administrative exemption could apply.  The administrative exemption is predicated on a salary test, and having a qualifying primary duty, characterized by performing office or non-manual work with discretion and independent judgment.  As usual, employers will need to review a position’s actual job duties to determine if it meets this criteria.  In this case, the WHD found some of the duties qualified as exempt where it related to management or general business operations, such as managing the county’s relationships with other public entities, preparing news releases, or writing and reviewing grant proposals.

FLSA2020-10: Commissioned Sales Exemption for New Representative Periods

Commissioned sales employees working in retail or service establishments may be exempt if their regular rate of pay exceeds one-and-a-half times the minimum wage, and if more than half of an employee’s compensation for a representative period of at least one month is derived from commissions on goods or services.  Here, the WHD confirmed that the exemption can be applied at the beginning of a representative period, even when the employer cannot yet determine if the commission compensation threshold will be met.  If the employee does not fulfill the exemption criteria, the employer must pay owed overtime for that period and may re-attempt to qualify for the exemption by entering another representative period.

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