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Legal Victory for Outside Salesperson Misclassified as Overtime Exempt — Hurwitz Law – Michigan Employment Attorney

On Behalf of | Sep 16, 2020 | Firm News

A salesperson with a job duty involving “outside sales” who is not compensated for overtime pay by the employer should be advised that the United States Sixth Circuit Court has recently clarified that overtime should indeed be paid under circumstances where the employee lacks the authority to finalize transactions.  That means an outside salesperson who is still required to make a customer verify a sale at the time of purchase with the company’s other employees may not be properly classified as “overtime exempt” and may be due back wages and other legal relief as a consequence of the employer’s misclassification.

In Hurt v. Commerce Energy, Inc., No. 18-4058 (6th Cir. 2020), the Sixth Circuit on August 31, 2020 affirmed a jury verdict finding that door-to-door solicitors for an energy supply company were not outside salespeople exempt from the protections of the FLSA . At trial, the district court asked the jury to consider the extent to which the employee has the authority to bind the company to the transaction at issue and whether the employer retains and/or exercises discretion to accept or reject any transactions for reasons that are unrelated to regulatory requirements applicable to the industry. Finding no error in the challenged jury instructions and evidentiary rulings of the district court, the appeals court affirmed the jury verdict.

The employees were hired as door-to-door solicitors for an energy supply company. They spent most of their time in the field seeking to convince customers to buy the employer’s electricity and natural gas products. The employer paid them exclusively on a commission basis without paying overtime or minimum wage. Employees were not required to have any sales experience or level of education; they were required only to go through an orientation and a sales training course. They also signed independent contractor agreements that contained confidentiality, non-disparagement, non-exclusive, and non-compete clauses.

For their solicitation, they were instructed to follow a script verbatim. When a potential customer became interested in a product, the employee filled out a customer agreement and obtained the customer’s signature. This agreement was non-binding and did not finalize the transaction.  The employees were thereafter directed to place a verification call from the customer’s premises for a third party to confirm that the customer entered into the agreement voluntarily and with full understanding of its terms. They were required to leave the premises before the customer spoke to the verifier. Still, the transaction did not become final until the customer went through a credit check and the company approved the application.

If you are an “outside salesperson” and would like to know more about the legal propriety of your position, please contact me!