Exemptions are defenses that employers use to avoid paying overtime to certain employees. The burden of proof as to whether or not an employee is exempt lies with the employer when it comes to overtime pay.
Whether or not a CA salesperson exempt from overtime is truly exempt depends on a number of factors that will be discussed below. Even if a salesperson is exempt from overtime under the California outside salesperson exemption or the California inside salesperson exemption, they are, in most instances, entitled to reimbursement of their work related expenses in accordance with California Labor Code 2802.
California Outside Salesperson Exemption
With regard to the outside sales exemption in California, California law in this area concentrates on the duties and place where these duties are performed. The outside salesperson exemption, California labor attorneys have found has been a hotly contested area in the courts and therefore an area that is abused by employers. If a salesperson spends over half of their day engaging in sales activity away from the employer's office, that person may fall under the California outside sales exemption.
Federal law is similar except that employees may fall under the CA outside sales exemption if they spend over 20% of their time engaged in the work of non-exempt employees. What this means is that if the outside sales person spends significant time performing tasks other than selling, then it must be more carefully determined whether or not that employee falls under the California outside salesperson exemption.
California Inside Salesperson Exemption
The California inside sales exemption is different in many respects from the California outside sales exemption. Under California law, the "commissioned sales exemption" better known as the “California overtime exemption inside sales” does not apply unless (i) the employee is an "outside" salesperson, who spends more than half of their time engaging in sales activities outside the employer's place of business; or (ii) the salesperson makes more than 1 ½ times the minimum wage, and more than half of that employee's compensation represents commissions. More importantly, the "commissioned inside sales exemption" only applies to workers who are employed in the mercantile industry (covered by Wage Order 7) or in professional, technical, clerical, mechanical and similar occupations (covered by Wage Order 4). You may find all wage orders relating to the California inside salesperson exemption and other exemptions on our Resources page.
Much like the outside sales exemption, California overtime law attorneys have found the inside salesperson exemption to also be another hotly contested area of litigation and the subject of much abuse by employers.
California Salesperson Commissions
The commission laws in California are extensive and regulate both California inside sales commission, California unpaid commissions, and California salesperson overtime commissions. Under CA laws, salesperson commissions are strictly regulated. There are many ways employers fail to comply with California law in paying commissions and minimum pay to sales employees.
CA labor law on payment of commission is quite clear. California inside sales commission as well as outside sales commission regulations provide that in general, employers must pay commissions earned but uncollected at the time of employment separation. It is generally improper for companies to fail to pay earned commissions during so-called “probationary” periods (for example, no commissions paid until an employee has been employed for six months).
Sales employees who work at the employer's office more than 50% of the time must receive at least minimum wage for all hours worked as well as minimum overtime for all hours worked.
In California, unpaid commissions at the time of a separation of employment must be paid to the employee in accordance with the commission laws in California or employers may face waiting time penalties of a full days wage for up to 30 days until the wages are paid.
If you think you may be improperly classified under the California salesperson exemption, or you feel you have a possible wage claim related to unpaid sales commissions or unreimbursed expenses, it is prudent to have a California labor law attorney review your potential wage claim.