Brand Representatives Meet Qualifications for Outside Sales Exemption

By Natalie F. Bare March 23, 2022
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Takeaway: This case represents a victory for employers with employees whose primary duty involves convincing buyers to commit to a sale, even if the employee does not finalize the sale themselves.

Nonetheless, when classifying employees as exempt, employers should remember that differences in the facts might result in a different outcome. For example, a court may not interpret another brand representative's activities as "making sales" if that employee is not "the last person to make an actual sales effort."

Employers should also remember that to qualify for an overtime exemption, the employee must meet all aspects of the test for that exemption. For example, under the outside sales exemption, it is not sufficient that the employee is "making sales." "Making sales" must be the employee's "primary duty."

In addition, employers must ensure that they comply with applicable state laws and with any differing interpretations of the FLSA's outside sales exemption by federal courts in other applicable jurisdictions. 

Judge's Gavel

The Fair Labor Standards Act (FLSA) did not require a marketing company to pay overtime to brand representatives because their product pitches to customers in retail stores qualified them for the outside sales exemption, the 1st U.S. Circuit Court of Appeals ruled.

Former brand representatives filed a class and collective action lawsuit in the U.S. District Court for the District of Massachusetts against their employer, Summit Retail Solutions Inc., seeking to recover unpaid overtime.

The brand representatives' job duties included setting up product displays in designated stores, demonstrating the products and persuading customers to place the products in their carts or baskets.

Summit argued that the brand representatives qualified for the outside sales exemption and therefore were not entitled to overtime under the FLSA and analogous state law. The parties cross-moved for summary judgment on that issue.

Under the FLSA regulations, an outside sales employee (1) is "customarily and regularly engaged away from the employer's place or places of business" and (2) has a primary duty of making sales, including "any sale, exchange, contract to sell, consignment for sale, shipment for sale or other disposition."

The plaintiffs argued that they did not meet this test because their primary duty of "communicating with potential customers and trying to convince them to buy the featured products" did not amount to making sales. Instead, they claimed they engaged in nonexempt promotional work.

The plaintiffs further explained that the individual stores' cashiers, not the brand representatives, finalized sales, and they noted that shoppers were free to remove the products from their carts after the sales pitch.

The district court disagreed with the plaintiffs' analysis and granted summary judgment in Summit's favor. On appeal, the 1st Circuit affirmed the district court's summary judgment ruling and held that the brand representatives' primary duty was making sales within the meaning of the FLSA.

In doing so, the appeals court found that the brand representatives were the last employees to make an actual sales effort. Even though they did not finalize the sales at the cash register, they worked "to persuade shoppers, who then can demonstrate some intention (or 'nonbinding commitment') to buy a product by placing it in their shopping carts or baskets."

As the court explained, the "promotional work" the brand representatives did was "so clearly incidental to their own sales efforts" and not "so that someone else can obtain a purchase commitment and consummate the sale." It therefore did not fall into the category of nonexempt "promotional work."

Moreover, the sale "finalization process" at the cash register was "simply a nondiscretionary, ministerial act that does not involve any additional sales effort." Indeed, the court found it significant that no entity at the store other than the brand representative "has any discretionary role in determining whether the sale is consummated."

This type of transaction, according to the court, "fits well within the broad 'other disposition' catchall for 'making sales.' "

Modeski v. Summit Retail Solutions, Inc., 1st Cir., No. 20-1747 (Feb. 25, 2022).

Natalie F. Bare is an attorney with Duane Morris in Philadelphia. 

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