Labor & Employment Law

How To "Sell" The Exempt Status Of Sales Representatives To A Court

By Mark E. Tabakman, Esq.

Amidst a wave of recent cases dealing with the exempt status of sales representatives, one case has shown what employers can do to eliminate liability for such workers as well as potential pitfalls that need to be avoided. In Barnick v. Wyeth, a judge dismissed a proposed class action against the Wyeth company, ruling that the a group of sales representative plaintiffs were exempt under the California statute they sought to bring suit under.

The judge granted Wyeth’s motion for summary judgment finding that the proposed plaintiff class—“representatives” of pharmaceutical products—were actually functioning as sales representatives, and therefore, were subject to the “outside salesperson” exemption.

This case teaches that the first step for employers to undertake when sued in a wage-hour class action is to examine whether it is a state or federal claim that is being brought against them. Employees may sue under either a state statute, the FLSA, or both and a particular state exemption or overtime law may likely have different, and often stricter, standards than the federal Fair Labor Standards Act (“FLSA”). The California wage and hour statute at issue in Wyeth did have tough requirements on employers—requiring overtime pay, meal breaks, and other benefits, highlighting that the FLSA and state laws are not always parallel, even though they can appear strikingly similar. In Wyeth, the federal judge refused to apply the FLSA’s definition of “sales” to California’s “outside salesperson” exemption, finding the definition to be “not persuasive” in his interpretation of the California statute.

In Wyeth, the salesperson at issue was hired on the basis of his sales experience, his job was referred to by his employer (and also himself) as a sales position, he received specialized “sales training” throughout his time there, and his pay was based in part on the sales he generated. According to the judge, all of these factors were significant in finding that the product “representative” was actually a functioning outside salesperson, and therefore exempt under the statute.

Thus, this claim was defeated in one fell swoop before it even got off the ground. A ruling of exemption for an entire class, or, more particularly, the named plaintiff(s) at a (hopefully) early stage of the litigation will erase the class action. The tough part is to know if there is an exemption defense to be raised and the manner and timing as to how to do it.

Full post as published by Wage & Hour - Development & Highlights on November 10, 2007 (boomark / email).