Compliance

Overtime and FLSA outside sales exemption

By Daniel Saeedi, Rachel L. Schaller

Jun. 28, 2020

Eugene Martinez was a sales representative for Superior HealthPlan, Inc. Martinez’s duties included soliciting Medicare Advantage Plans. Superior classified Martinez as an independent contractor pursuant to the terms of his sales agreement. Martinez subsequently filed a lawsuit against Superior, alleging that he was misclassified as an independent contractor and was entitled to overtime pay under the Fair Labor Standards Act. Superior  filed a motion for summary judgment regarding Martinez’s FLSA claim, arguing that even if Martinez was an employee he would not be entitled to overtime pay because he fell under the FLSA’s outside sales exemption.  

The U.S. District Court for the Western District of Texas held that Martinez was not entitled to overtime pay because the outside sales exemption applied. The court assumed that Martinez was an employee for purposes of argument and focused on Martinez’s actual job duties for Superior. The court noted that Martinez spent virtually every weekday in sales appointments away from Superior’s offices. The court deemed that the FLSA’s outside sales exemption applied and Martinez to the extent that he should have been classified as an employee and was not entitled to overtime pay. Martinez v. Superior HealthPlan, Inc., 371 F. Supp. 3d 370 (W.D. Tex. 2019). 

IMPACT: Companies that employ sales representatives should be aware of the fact that such employees are not automatically exempt under the FLSA. Under the FLSA, an employee may be classified as exempt from overtime pay if he or she is paid above the FLSA’s earnings threshold and his or her duties meet one or more exempt “duties test” categories (i.e., executive, administrative, professional or outside sales exemptions).

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