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The Second Circuit’s Analysis of the “Outside Sales” Exemption

This month, the Second Circuit vacated a district court order concluding that Time Warner’s Territory Sales Representatives (“TSRs”) who spent the majority of their time at work performing non-exempt work were “outside salesmen” and were therefore exempt from the FLSA overtime provision. Sydney v. Time Warner Entertainment-Advance/Newhouse Partnership, 17-cv-1219, 2018 U.S. Dist. Lexis 28097 (2nd Cir. NY, Oct. 4, 2018).

The FLSA requires employers to pay overtime to employees who work more than 40 hours per week. However, under the FLSA, outside salesmen are exempt from the FLSA overtime provisions. An outside salesperson is defined as an employee: (1) whose primary duty is (i) making sales within the meaning of Section 3(k) of the Act, or (ii) obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and (2) who is customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty. 29 C.F.R. § 541.500(a)(1)-(2).

In Sydney, two TSRs appealed the district court’s decision that they were exempt from the FLSA’s overtime provisions under the “outside salesmen” exemption. Concluding that the labor required to complete installations was more consistent with the work of an installer than that of a sales rep, the appeals court found that the district court erred in holding on summary judgment that the outside sales exemption applied. The two former TSR’s primary duties primarily included the physical installation of cable, internet, and telephone equipment at apartment complexes. TSRs were responsible for developing and maintaining positive relationships with leasing agents and management, and worked 50 to 70 hours per week, performing on average five to ten installations per day. The appeals court determined that because a reasonable fact finder could conclude that the TSRs spent the majority of their time at work performing non-exempt work, i.e. installations, they did not satisfy the primary duty requirement.

The Second Circuit vacated the judgment of the district court holding that the installations conducted by the TSRs were not merely incidental to their sales efforts.

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