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Primary duty of sales reps was installations, so no ‘outside sales’ exemption from overtime

By Ronald Miller, J.D.

Holding that a reasonable factfinder could find that Territory Sales Representatives (TSRs) for a cable, television, and internet provider spent the majority of their time at work performing non-exempt work (installations), the Second Circuit vacated a district court order concluding that they were “outside salesmen” exempt from the FLSA overtime provision. Reversing summary judgment, the appeals court found that the evidence did not support a conclusion that the employees’ sales duties were more important than their installation duties. They provided information (not considered by the district court) about the labor required to complete installations, which was more consistent with the work of an installer than that of a sales rep (Sydney v. Time Warner Entertainment-Advance/Newhouse Partnership, October 4, 2018, per curiam, unpublished).

Two former TSRs for a subsidiary of Time Warner Cable challenged the district court’s grant of summary judgment in favor of the employer with respect to their claims for unpaid overtime. Subject to certain exemptions, the FLSA and New York Labor Law (NYLL) require employers to pay overtime to employees who work more than 40 hours per week. Relevant here is the provision that “any employee employed in the capacity of outside salesman” is exempt from the FLSA and NYLL overtime provisions.

On appeal, the employees argued that the district court erred in concluding that they were exempt from the overtime provisions under the “outside salesmen” exemption.

Outside salesperson defined. 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 deciding whether to grant an employer’s motion for summary judgment on the ground that an employee is exempt from the FLSA’s overtime provision, the court must first construe the evidence regarding how the employee spent his or her time. The court must then decide whether the exemption applies to those facts.

In this instance, the Second Circuit concluded that the district court erred in holding on summary judgment that the employees’ primary duties were exempt sales, as opposed to non-exempt installations, and accordingly in its ultimate conclusion that the outside sales exemption applied.

Primary duties. According to the employees, their duties as TSR’s were primarily the physical installation of cable, internet, and telephone equipment at apartment complexes. TSRs were assigned to, and were responsible for developing and maintaining positive relationships with leasing agents and management at the apartment complexes to which they were assigned. They provided their contact information to apartment managers, along with business cards and promotional materials, and asked managers to have their tenants call them to place orders for the employer’s services. In order to maintain good relationships, the TSRs met with apartment managers once a week and would occasionally host events for tenants in order to ensure they were having a positive experience with the employer’s products.

Tenants could contact the TSRs directly to order services. During calls, TSRs would attempt to have customers sign up for as many services and “bundles” of television programming and internet service as possible. The installation of service could proceed in one of three ways: (1) the tenant could receive a self-installation kit; (2) the TSR would deliver the equipment and perform the installation; or (3) the TSR would have a technician perform the installation.

According to the employees, they worked 50-70 hours per week. They typically performed five to ten installations per day. Installations could take from 30 minutes to several hours. Additionally, they would receive two to three calls per week to troubleshoot customer issues. They spent the majority of their time in the field.

Application of outside sales exemption. Here, the Second Circuit concluded that a reasonable factfinder could conclude that the TSRs spent the majority of their time at work performing non-exempt work—installations. Although “time alone is not the sole test” for resolving the “primary duty” inquiry, the amount of time that an employee spends performing exempt work “can be a useful guide in determining whether exempt work is the primary duty of an employee, 29 C.F.R. § 541.700(b). Thus, employees who spend more than 50 percent of their time performing exempt work will generally satisfy the primary duty requirement. Conversely, employees who spend most of their time performing non-exempt work generally do not satisfy the primary duty requirement.

Still, the court had to determine whether factors other than “time spent” warranted a finding that the employees were exempt salespersons. In this instance, the evidence did not support a conclusion that the employees’ sales duties were more important than their installation duties. While growing its customer base and convincing existing customers to purchase additional services was undoubtedly paramount to the employer, the court found that the employee’s installation duties were also consequential. Installation technicians performing similar work to the TSRs non-exempt work were paid hourly wages and received overtime, which weighed in favor of the employee’s position that they were non-exempt.

The employees also provided additional information (not considered by the district court) about the labor required to complete installations, which was more consistent with the work of an installer than that of sales rep. TSRs received a week of safety, equipment, and installation training. Oftentimes when performing installations, they had to clear snow or go through crawl spaces, or cubby holes in order to access the main cable box in the building. In other units, TSRs had to run coaxial wires through different rooms. Additionally, the equipment they were required to carry could be quite heavy.

The district court also failed to consider evidence regarding the employer’s “Direct Sales Representatives” (DSRs), who were tasked with making door-to-door sales to potential customers. Significantly, they conducted such sales activity in apartment complexes. DSRs did not perform installations. The presence of DSRs at apartment complexes assigned to TSRs undercut the employer’s argument that TSRs’ primary duty was sales.

Although the majority of the TSRs’ income came from commissions, a significant portion of those commission payments were actually payments for installations that they performed.

Because it could not conclude as a matter of law that the installations conducted by the TSRs were merely incidental to their sales efforts, the appeals court vacated the judgment of the district court.