Product Demonstrator Not Considered Outside Salesperson Under California Law

 An employee is not subject to California's outside salesperson exemption when the employer controls the employee's hours and working conditions, even if they work at a fixed site not owned or leased by the employer, a California appeals court recently ruled. Therefore, a product demonstrator at a warehouse store, who sued the product demonstration company for wage and hour violations, could proceed with her class-action lawsuit, the court said.

Outside salespeople in California are exempt from statutory overtime, minimum wage, reporting time and meal-and-rest break requirements. California regulations define "outside salesperson" as a salesperson who regularly works more than half of their working time away from the employer's place of business. The main reason for this exemption is that outside salespersons generally control their own hours and are paid on a commission basis.

The employer in this case was the exclusive product demonstration company for a large warehouse store chain. Its employees demonstrate various products inside the stores. The demonstrators are typically assigned to a single store and do not travel from store to store.

The company does not lease any portion of the warehouse store but maintains an office space within each store. The company stores its equipment in this space and has a desk for its managers to do paperwork and check e-mail. Employees also clock in and out here on a tablet device.

Further, as part of the company's agreement with the warehouse chain, demonstrators are responsible for cleaning up their work or demonstration areas at the end of their shifts, as well as maintaining their work area in a safe and sanitary condition.

The employee worked for the company as a demonstrator from 2011 to 2016. She worked four days a week, and her regular shift lasted for six hours. Upon arriving at the warehouse store, she went to the product demonstration company's office in the back of the store, clocked in, reviewed her assignment to see what she would be selling or promoting that day, got her supplies and equipment, set up her cart and took it out to the floor near the product, and started demonstrating and promoting the product.

The employer's policy was that demonstrators could not leave their demonstration areas unattended at any time during their six-hour shifts. Because of this, the employee could leave her demonstration area to take a break only when an assigned breaker (another demonstrator) came to relieve her.

At the end of her shift, the employee had 15 minutes to take her cart back to the office, wash her dishes and put her supplies away. She then waited for her turn to clock out on the tablet device. She had to input her lunch break time when she clocked out.

Wage and Hour Lawsuit

The employee filed a class-action complaint against the company that alleged multiple state Labor Code violations, including failure to pay wages and overtime and failure to provide meal-and-rest breaks. The company sought to have the lawsuit dismissed before trial on the grounds that the employee fell under California's outside salesperson exemption.

The company argued that the employee met the requirements for an outside salesperson because she was engaged in selling away from the company's place of business. Therefore, the employer argued, the requirements for overtime, wages and meal-and-rest breaks did not apply to her.

Meanwhile, the employee argued that the company did not show that she was an outside salesperson. Although the company did not lease space at the warehouse store, she said, it exerted extensive control and supervision over its office and demonstration areas within the store, so that the employee did not work outside of the company's place of business for purposes of the outside salesperson exemption.

A trial court dismissed the action before trial, and the employee appealed.

The appellate court agreed with the employee and reversed the trial court decision, ruling that the employee could proceed with her lawsuit.

In this case, the appeals court said, the employer does control its employees' hours and working conditions, even though those employees are working on property the employer does not own or lease.

For all intents and purposes, the court said, the company operated out of and treated all the different warehouse stores as their satellite branches or offices.

Unlike the typical traveling salesperson who sets their own hours and decides when and where to work, the employee in this case had a set schedule every week. She clocked in before she started working and clocked out and reported her lunch breaks once she stopped working for the day.

Espinoza v. Warehouse Demo Services Inc., Calif. Ct. App., No. A165820 (Dec. 23, 2022).

 Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.