San Francisco Employment Law Firm Blog

One exemption from overtime compensation under Fair Labor Standards Act is known as the "Outside Salesperson Exemption." This exemption permits an employer to not pay overtime as otherwise required under California law, but only if a particular worker
(a) has the primary duty of (a) making “sales” or (b) obtaining orders or contracts for services or facilities usage, and
(b) is customarily and regularly engaged away from the employer’s place of business in performing such primary duty.

The information above can be found at 29 USC § 213(a)(1) and 29 C.F.R. § 541.500. In order to qualify for this exemption under California law, however, the employee must spend more than 50% of his/her working time performing truly-exempt sales functions away from the employer’s business establishment (or away from the employee’s home, if that is where the employee is normally based).

Another commonly applied overtime exemption applies to primarily commission-based salespeople. Section 7(i) of the Fair Labor Standards Act (29 USC § 207[i]) will exempt a particular employee from overtime compensation if:
(a) the employee is employed in a “retail or service establishment,” and
(b) the employee’s regular rate of pay exceeds one and one-half times the applicable minimum wage, and
(c) more than half the employee’s compensation for a representative period represents commissions on goods or services.

Note that the “regular rate of pay” language, referenced in the above federal test, applies on a workweek basis. This means that the average of compensation for two or more weeks does not satisfy this requirement.

If you have any questions about overtime or your rate of compensation in California, contact San Francisco employment lawyer Arkady Itkin to address your concerns about wages.

Posted by Arkady Itkin | Permalink | Email This Post

Posted In: Fair Labor Standards Act (FLSA) , Overtime , Wages and Compensation

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Under FLSA an employee will be considered to be paid on a "salary basis" and thus exempt for the purposes of overtime compensation, if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all of part of the employee's compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. 29 C.F.R. section 541.602(b)(1)(2004). Employees must also be paid a specified minimum salary in order to qualify as exempt.

The effect and the reason behind those provisions is to prevent employers from docking the pay of an employee for an absence of less than a day (partial day absence). In other words, the employer should only deduct pay for one day absences or longer. Thus, if an exempt employee takes a few hours off, that should not be deducted from pay. If an employee takes one day and a half off, the employer, with a small number of exceptions, can only deduct one day from that pay period. If the employer makes partial day deductions, then the employees subject to those deductions do not meet the salary basis test, and are non-exempt for the purposes of overtime pay.

Thus, an employer should be very careful with partial day deductions against exempt employees' pay, as classifying employees as "salaried exempt" while docking their pay for partial day absences will likely subject an employer to liability for failure to pay overtime compensation for at least the entire time that the policy of partial day deductions has been in place.

Posted by Arkady Itkin | Permalink | Email This Post

Posted In: Fair Labor Standards Act (FLSA) , Overtime , Wages and Compensation

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