Recent Settlement Of FLSA Collective Action A Reminder Of The Perils Of Outside Sales Exemption

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A federal district court judge recently approved the final settlement of a lawsuit between a collective class of sales representatives and their employer regarding an alleged misclassification under the outside sales exemption of the Fair Labor Standards Act (FLSA).  In the Complaint, the plaintiffs claimed that while they bore the title of “sales representatives,” their primary duties actually involved stocking their employer’s items at grocery stores, arranging displays, receiving goods, and other non-sales duties.  The parties to the lawsuit reached a proposed settlement of more than $3 million to resolve the claims.  While the settlement agreement contained a non-admission clause denying that the employer had misclassified the plaintiffs, the mere filing of the case and the seven-figure settlement serve as a reminder to employers of the risks of misclassifying outside sales personnel.  The outside sales exemption seems straightforward on its face, requiring that an employee: (a) have the primary duty of making sales (as defined in the FLSA); and (b) be customarily and regularly engaged away from the employer’s place or places of business.  However, in practice, employers frequently confuse “sales” and “promotional work” and fall into other classification traps that can lead to costly lawsuits.  When in doubt, employers should consult counsel regarding the classification of employees as exempt from overtime requirements.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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