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DOL Issues Opinion Letter on the Outside Sales Exemption — New Home Sales Persons Are Exempt; Timeshares Sales Persons Are Not Exempt

Volume 6, Issue 3
March 2, 2007

The U.S. Department of Labor recently issued three Opinion Letters applying the Fair Labor Standard Act's ("FLSA") outside sales exemption to new home and timeshare sales persons, determining that only the new home sales employees were exempt. To qualify for the outside sales exemption: (1) the employee's primary duty must encompass "making sales" (as the Act defines it) or obtaining orders or contracts for services or for use of facilities for which a consideration will be paid by the client or customer; and (2) the employee must be customarily and regularly engaged away from the employer's place or places of business in performing that primary duty.

The DOL easily determined and/or assumed that all employees presented in the three Opinion Letters were sales employees. Thus, the determination of whether the new home and timeshare sales persons were exempt turned on the latter component of the outside sales test - whether they were customarily and regularly engaged away from the employer's place of business. The DOL explained that an outside sales person is one who makes sales at the customer's place of business or home, as opposed to the employer's place of business. Any location used by the sales person as a headquarters or for telephonic solicitation of sales, such as the sales person's home, is considered one of the employer's places of business even if the employer does not own or rent the property.

The new home sales persons operated from an office in a model home or trailer located on or near a construction site. This office was considered part of the employer's place of business. The DOL determined, however, that the new home sales persons were customarily and regularly engaged away from this place of business - the model home office or trailer - because they regularly left the office to engage in selling or sales related activities. The DOL explained that "an indispensable component" of their work was to tour model homes and lots, take buyers to recently-completed homes or homes under construction, and inspect and view homes under construction with buyers throughout and at the completion of the construction process. As such, the new home sales persons qualified for the outside sales exemption.

The timeshare employees promoted and sold timeshare interests in resorts. Like the new home sales persons, they worked from an office located at or near the resort and regularly left the office to tour the resort with prospective buyers. The employer of the timeshare sales persons, however, owned the resort and maintained a continuing interest, therefore, in the resort and the timeshares that were sold. As such, the DOL determined that the entire resort was the employer's place of business and that the timeshare sales person's activities of touring the resort did not constitute sales activities away from the employer's place of business. Conversely, the new homes sales persons worked for an employer who did not maintain an ownership interest in the subdivision once all home sites were sold. As such, the entire new home development where the new home sales person performed much of his/her work was not considered the employer's place of business. Because the timeshare sales person's work was performed at the resort - part of the employer's place of business - these employees did not qualify for the outside sales exemption.

The Opinion Letter is based solely upon the specific duties engaged in by three companies' employees and should not be relied upon to determine that all similar employees are or are not exempt. Instead, the Opinion Letter should be viewed as a good refresher on the outside sales exemption and an illustration of how the DOL analyzes the issue of "away from the employer's place of business."

Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.