California Outside Salesperson Exemption

California Outside Salesperson Exemption Law

All California IWC Wage Orders include a provision that makes outside salespersons exempt from overtime, minimum wage, meal periods, rest periods, and all other wage, hour, and working conditions requirements set forth in the Wage Orders.

For example, California IWC Wage Order 4-2001 sets forth the outside salesperson exemption in section 1(C):

(C) The provisions of this order shall not apply to outside salespersons.

The Wage Orders define “outside salesperson.” For example, Wage Order 4-2001 defines “outside salesperson” as follows:

“Outside salesperson” means any person, 18 years of age or over, who customarily and regularly works more than half the working time away from the employer’s place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities.

Outside Salesperson Exemption Analysis

Let’s break this down:

To be an exempt outside salesperson you must:

  • Be over 18 years old
  • “Customarily and regularly” work more than 50% of the workday away from the employer’s place of business
  • Sell tangible or intangible items OR obtain orders or contracts for products, services or use of facilities
Note: Exempt outside salespersons do not need to earn a minimum amount each pay period, and they can be paid on a salary, hourly, commission, or any other payment basis.

Of the above requirements, the two that are the hardest to figure out are the “customarily and regularly” language and selling “tangible or intangible items” language.

What does it mean to “customarily and regularly” work more than 50% of the workday away from the employer’s place of business for the outside salesperson exemption?

The Department of Labor Standards Enforcement clarifies what it means to be an outside salesperson who “customarily and regularly” works more than 50% of the workday away from the employer’s place of business:

So long as the individual spends more than half of his or her time away from the employer’s place of business and, during that period of time is engaged in sales of tangible or intangible items or obtaining orders or contracts for products, services or use of facilities, the individual is [exempt from the Wage Order's provisions for overtime, etc.]. However, if the activities of the individual during the fifty percent of the time involve anything other than sales, the [employee would be nonexempt]. – DLSE Opinion Letter 1994-07-14.

The DLSE goes on to note that “sales promotion” is also considered exempt “sales” activity. Additionally, “the stocking of a vehicle with samples or advertising material is considered a part of the sales promotion work so long as the ‘samples’ or materials are not sold. DLSE Opinion Letter 1994-07-14.

What is the “employer’s place of business” under the outside salesperson exemption?

You should also note that “the employer’s place of business” is not limited to a principal place of business or an administrative headquarters. For example, “temporary trailers and model homes located at a tract housing site, although separate from the home builder’s or seller’s headquarters office nonetheless constitute ‘the employer’s place of business.’” DLSE Opinion Letter 1998-09-08. Salespersons who work at such model homes would not fit under the outside salesperson exemption.

Note: If you work in on-site in the Construction, Drilling, Logging or Mining Industries but you still meet the above requirements, you would be nonexempt from overtime, meal periods, etc. if you make deliveries or service calls for the purpose of installing, replacing, repairing, removing, or servicing a product.

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