Bright Future in Sales? The Outside Salesperson FLSA ExemptionWith minimum wage increasing at federal, state, and local levels and with wage and hour cases on the rise, we receive many questions about exemptions to overtime laws. One such exemption that does not get as much coverage as others is the “outside sales exemption.” If your company has an outside salesperson – selling goods or services – this may be an exemption for you.

The Federal Basics

The federal law governing wages and hours is called the Fair Labor Standards Act (FLSA). The FLSA requires minimum wage for all hours worked and wages at one and one half times the base rate of an employee for all hours worked over 40 in a work week. There are exemptions from the minimum wage and overtime requirements that fall into two basic categories. One is for supervisory employees who are paid a salary, and the other is for employees in “outside sales” positions. In general, to meet the exemption, an employee’s “primary duty” must be “making sales” or “obtaining orders” and he or she must be “customarily and regularly engaged” away from the employer’s place of business. Notably, there is no particular pay method required to meet this exemption as there is for other FLSA exemptions.

For clarity, the regulations define these important terms as follows:

  • Primary Duty: The primary duty is the principal, main, majority, or most important duty that the employee performs.
  • Sales: Sales include any sale, exchange, contract to sell, shipment for sale, or other disposition.
  • Away: Away can mean the customer’s place of business or home or some other selling location (a hotel is an example) but not the employer’s place of business whether by telephone or by internet or in person.

Check State Laws

Companies wishing to use the outside sales exemption must be careful of state laws regarding overtime as well. Many states have no law at all or else have a law but follow the federal requirements for the exemption exactly. Other states, however, have a unique test for the exemption or even have very specific limits on how much non-sales work an employee can perform without losing the exempt status. For example, an employee can spend no more than 20 percent of his time on non-sales activities in Pennsylvania or else the exemption is lost.

Some tips:

  1. Make sure your employee is selling something. Needless to say, this is fairly important. Job descriptions should have the word “sell” in them a lot.
  2. Limit administrative or clerical work.
  3. Emphasize that the work should be performed at the customer’s place of business or the customer’s home if applicable.
  4. Make sure that the compensation structure is commission based and distinguishable from the pay methodology for other employees.
  5. Minimize direct supervision of your exempt outside salesperson, especially over “tasks” or repetitive work. The supervisor’s focus should be on sales goals.
  6. If some sort of tracking is used, make sure the tracking is of sales goals and not hours worked.
  7. Minimize work “on the phone” from the office or a fixed location.
  8. Make sure that any promotional work is done for the employee’s own sales.

The Iceman Cometh: Worksite Immigration Enforcement on the Rise, So Check Your I-9sAs the Trump administration’s crackdown on illegal immigration proceeds on numerous fronts, employers increasingly find themselves caught in the crosshairs. In fact, U.S. Immigration and Customs Enforcement (ICE) recently announced that it commenced approximately twice as many worksite investigations and I-9 audits in the first seven months of FY2018 (which began on October 1, 2017) as it did in all of FY2017. This dramatic upsurge is consistent with the December 2017 comments of then-Acting ICE Director Thomas Homan that he wanted “to see a 400% increase” in ICE’s worksite enforcement operations.

The Importance of Proper Form I-9 Compliance

In today’s environment, employers must be proactive to make sure they don’t unwittingly find themselves in hot water with ICE. The key to avoiding ICE problems is rigorous Form I-9 compliance. ICE is only required to provide a three-day notice of an I-9 audit; if your Form I-9s are not in order, you can face substantial monetary liability.

Employers must complete a Form I-9 for every new hire, regardless of citizenship or immigration status. Even one missing or incomplete Form I-9 can result in a violation, and the fines typically increase significantly as the number of violations discovered goes up. In addition, if an ICE audit reveals that there are unauthorized employees in the employer’s workforce, shoddy Form I-9 compliance can be considered evidence that the employer had constructive knowledge that those employees were unauthorized. This can result in even more exposure.

What Specific Measures Should Employers Take?

The time to make sure your Form I-9 compliance is in order is now. These tips can help eliminate or reduce your potential I-9 liability:

  • Training. Make sure that the company representatives responsible for Form I-9 compliance understand the process and are committed to doing it correctly. The Form I-9 is only two pages long, but it can be confusing, and completion errors are common. Proper training is essential.
  • Check the form. Use the correct version of the Form I-9. The USCIS periodically issues a new Form I-9, and it is a violation to use an out-of-date version.
  • Timeliness. Make sure that your Form I-9s are completed on time. You may complete a Form I-9 as soon as the new hire accepts employment, but you must complete it no later than the third day of employment.
  • Separate files. Keep your Form I-9s in a separate file (not in the personnel file). In the case of an ICE audit, you will have very little time to produce your I-9s. Being able to locate them immediately is critical, as that will give you time to review – and potentially make appropriate corrections (which is permissible) – before turning them over.
  • Re-verify when necessary. Make sure that any employees with temporary work authorization (g., working on a non-immigrant visa or a time-limited Employment Authorization Card) are timely re-verified. A good way to do this is to use a tickler system that provides reminders when re-verifications are due.
  • Pay attention to document retention. Implement a protocol for discarding those Form I-9s that you no longer have to keep. Employers must keep Form I-9s for all current employees. Upon termination (for any reason), an employee’s Form I-9 must be maintained for three years after hire or one year after termination, whichever is longer. Make sure that your Form I-9s are kept for the required period, but have a procedure for discarding those that are no longer needed.
  • Audit. Conduct an internal Form I-9 audit. Having a trained HR professional or other independent third-party review the Form I-9s already on file gives you an opportunity to identify and correct errors and get any missing Form I-9s completed. It’s easier and less stressful—and will be viewed much more favorably by ICE—if you get your Form I-9s in shape before ICE shows up. Be sure to make any necessary corrections transparently and in accordance with ICE’s published guidance.
  • Have a plan. Because you will typically receive only three days’ notice of an ICE Form I-9 investigation, it is essential to have a response plan in place. Identify beforehand the personnel who will communicate with ICE and coordinate the effort to respond to ICE’s inquiries. Being unprepared and making mistakes when ICE comes calling often leads to serious negative consequences.

Point for the (Work from) Home Team? Sixth Circuit Says Attendance at Work Not Automatically an Essential Work Function“You have to show up for work—it’s a part of your job.” Attendance at the workplace is an essential work function in an ADA case. But is it really anymore? With technology, some would argue that many jobs can be done from anywhere, and employees (particularly disabled employees) are more and more seeking to work from home. The Sixth Circuit addressed this issue recently in the decision of Hostettler v. College of Wooster.

Alternative Work Schedule

Heidi Hostettler worked in the HR department of the College of Wooster. She was four months pregnant when she took the job, and the told her that they would allow her 12 weeks of unpaid maternity leave, even though she didn’t qualify for it under the FMLA due to her short time of service. Her HR position was full-time, and Ms. Hostettler’s duties included performance-improvement plans, recruiting new hires, and designing training programs.

After the birth of her child and her 12 weeks of leave, Ms. Hostettler presented a note from her doctor stating that she had postpartum depression and one of the worst cases of separation anxiety her doctor had ever seen. The doctor suggested a return to work on a part-time basis for maybe a month or two. The college said okay, and Ms. Hostettler began working half days, but she had severe panic attacks if she had to work much later than noon. However, she returned emails from home and performed other work activities while away from the office.

There were disputes about whether the modified schedule was working. Several employees (through affidavits) said that there were no problems with Ms. Hostettler working part-time and from home. During this time, Ms. Hostettler got her first annual evaluation that indicated she was doing a good job and did not mention a problem with her reduced schedule. However, the college said the schedule was putting a strain on the rest of the HR Department. After several months, Ms. Hostettler submitted a new certification from her doctor that said she should continue to work part-time for at least several months.

After that latest certification, the college terminated Ms. Hostettler citing that she was unable to return to her assigned position of HR Generalist in a full-time capacity. A few months later, the college hired a male replacement. Ms. Hostettler sued for violations of the ADA and FMLA and for sex discrimination. The college moved for summary judgment stating that since the position considered full-time work as an essential function, and Ms. Hostettler couldn’t do that, that she was not a qualified individual under the ADA. The lack of being a qualified individual for the position also supported dismissal for the other claims. Ms. Hostettler appealed.

Sixth Circuit Analysis

The Sixth Circuit focused on the fact that the college admitted that the sole reason it fired Ms. Hostettler was because it could no longer accommodate her modified schedule. The court noted that the standard for her being qualified is that she can perform the essential functions of a job with or without an accommodation. The court pointed out that a job function is only essential if it is a core job duty—one that would fundamentally alter the position if it was removed. This analysis has to be done on a case-by-case basis.

In this case, Ms. Hostettler submitted evidence that she had satisfied all the core tasks of her position—even when she was only at her office for half days. She also submitted an affidavit from a co-worker who noted that there were no problems during Ms. Hostettler’s time in the position and that she completed all her work in a timely manner. Ms. Hostettler also showed that even her supervisor gave her a good review while she was working the part-time schedule. The court did note that there was evidence presented to the contrary —some projects had “dropped through the cracks” while Ms. Hostettler was working part-time. Another apparent dispute of fact was that while the college said it talked to Ms. Hostettler about the need for her to be at work full-time, she denied that series of discussions had taken place.

The Sixth Circuit held that full-time presence at work is not, on its own, an essential function. Time and presence requirements must be tied to some other job requirement. The court distinguished cases where presence at the workplace was considered an essential function by showing that in those cases, the person had to physically be at the worksite to complete the job. Instead, the court felt that this case was more like other instances where an employee could complete the essential functions while working remotely. According to the court, “full-time presence at work is not an essential function of a job simply because an employer says it is.” In the end, the court reversed the summary judgment, finding that

“an employer cannot deny a modified work schedule as unreasonable unless the employer can show why the employee is needed on a full-time schedule; merely stating that anything less than full-time employment is per se unreasonable will not relieve an employer of its ADA responsibilities.”

Is Attendance an Essential Function?

While this case probably will soften the edges around some accommodation requests to work from home, it doesn’t automatically preclude an employer from claiming that full-time presence at the workplace is an essential job function.

  • Jobs where the work can only be performed at the job site—such as construction, manufacturing, call centers, etc.—-will not likely be affected.
  • Office work and sales jobs where technology may allow an employee to conduct work from other locations, or on other schedules, may be affected.

This decision should inspire employers to re-examine job descriptions and determine what sort of functions they believe can only be done at the job site. Those descriptions need to be detailed and supportable. Finally, remember that one size does not fit all, and every request has to be assessed on its own. You cannot deny an employee’s modified or work-from-home schedule because no one else has such a schedule. Each request must have a separate, well-documented interactive process.