The Outside Salesperson Exemption to California’s Labor Laws

Most California employees are entitled to be paid minimum wage.⁠1 They are also entitled to overtime wages when they work more than eight hours in a workday, more than 40 hours in a workweek, or on a seventh consecutive day of work in a workweek.⁠2

Some employees, however, are exempt from minimum wage and overtime laws, as well as related laws requiring employers to provide rest periods.⁠3 The primary exemptions in California apply to executive, administrative, and professional employees.

Another exemption, recognized by both California and federal law, applies to outside salespersons.⁠4 The outside salesperson exemption differs from the other exemptions in that outside salespersons are exempt regardless of the compensation they earn.⁠5

An employee counts as an exempt outside salesperson only if the employee is at least 18 years old and customarily and regularly spends more than half of his or her working time away from the employer's place of business, selling items or obtaining orders or contracts for products, services, or the use of facilities.⁠6 When those criteria are not satisfied, the exemption does not apply and California's normal wage and hour laws must be followed.

Definition of Outside Salesperson

California law defines an outside salesperson as:

• A person 18 years of age or over,
• Who regularly spends more than half their working time away from the employer's place of business, and
• Who sells items, or obtains orders or contracts for products, services, or the use of facilities.⁠7

Each element of that definition must be met before an employee can be classified as an exempt outside salesperson.

Age

Only adult employees (age 18 or over) can be classified as exempt, even if they meet the other requirements for the outside salesperson exemption.⁠8

Location of Work

The location at which work is performed is a critical factor that defines an outside salesperson. Where the employee spends his or her work time is determined not just by the employee's job description, but by where the employee actually works.⁠9

The employee must customarily and regularly spend more than half of their worktime away from the employer's place of business.⁠10

The employer's place of business is any fixed location, including the salesperson's home, that the salesperson uses as a place of business. The exemption is meant to apply to salespersons who are visiting a customer's place of business or selling door-to-door.⁠11

Time that the salesperson spends making telephone solicitations, addressing mailed advertisements, or doing other sales work in an office (including a home office) does not count as time that the salesperson is working outside the employer's place of business.⁠12

Sales Duties

An exempt outside salesperson must not only spend more than half of his or her working time away from the employer's place of business, but that time must be spent selling or obtaining orders for products or services, including the use of facilities.⁠13

The test under California law has been described by courts as “uniquely quantitative.”⁠14 If the employee spends more than half of his or her work time away from the employer's place of business, but less than half of his or her overall work time is devoted to selling, the employee cannot be classified as an exempt outside salesperson.

Time that is not directly devoted to making sales, but that is necessary to making sales, may count as time spent “selling” or “taking orders” if the time is spent away from the employer's place of business. Driving to a customer's place of business to make a sales call is thus counted as time spent “selling.”⁠16

On the other hand, if a salesperson is driving both to make a sales call and to make a delivery (or for some other non-sales purpose), the driving time must be apportioned between the two purposes when deciding whether more than half the employee's time is devoted to selling.⁠17

Employers may not evade overtime regulations by imposing unrealistic expectations that employees will spend more than half their time selling, when their actual job duties require them to spend most of their time engaged in non-sales activities.⁠18

But, if an employee who is supposed to be engaged in sales activities falls below the 50 percent mark due to his or her own substandard performance, the exemption might still be met.⁠19

When a dispute arises concerning the job duties an employee classified as an outside salesperson actually performs, courts inquire into the realistic requirements of the job. In doing so, they consider several factors:

• How the employee actually spent his or her time;
• Whether the employee's practice diverged from the employer's realistic expectations;
• Whether the employer concretely expressed displeasure over the employee's substandard performance; and
• Whether those expressions of displeasure were realistic given the actual overall requirements of the job.⁠20

How the employee actually spends his or her time is the most important factor,⁠21 but in some cases an employer's realistic expectation that an employee will spend most of his or her time making sales will justify the exemption even if the employee (through his or her own fault) fails to do so.

Salespeople who fail the outside salesperson test are not always entitled to overtime, however. A separate exemption covers certain commissioned employees: an employee whose earnings exceed one and one-half times the state minimum wage of $16.90 per hour, and whose compensation is more than half commissions, is exempt from the wage order's overtime requirements (although not from its minimum wage, meal period, or rest break protections).⁠22 Related guideCommission-Based Pay in CaliforniaHow commission pay works under California law, including the overtime exemption for commissioned salespeople.

The Effect of the Exemption

The outside salesperson exemption sweeps more broadly than California's other exemptions. The executive, administrative, and professional exemptions remove only some of a wage order's protections, but the wage orders do not apply to exempt outside salespersons at all.⁠23 Exempt outside salespersons are therefore not entitled to the minimum wage, overtime pay, meal periods, rest breaks, reporting-time pay, or the wage order's other protections.⁠24

The exemption does not erase every workplace right, however. Protections that come from laws outside the wage orders still apply. Exempt outside salespersons remain entitled to:

• Reimbursement of the business expenses they necessarily incur in doing their jobs, including mileage and other automobile costs;⁠25
• Paid sick leave of at least 40 hours or five days per year;⁠26 and
• An itemized wage statement each pay period, although the statement need not show the total hours an exempt outside salesperson worked.⁠27

Applying the Tests

California law has adopted a “strong public policy” of protecting the welfare of workers and assuring a stable labor market. To that end, if the meaning of a California wage and hour law is unclear, courts will interpret the law to promote protection of employees.⁠28

Exemptions, in particular, are narrowly construed and are only allowed if the employer is “plainly and unmistakably” entitled to classify the employee as exempt. If an employee disputes the classification, it is the employer's burden to prove that the employee was properly classified as exempt.⁠29

Whether an outside salesperson can be classified as exempt usually requires a close examination of the work that the employee actually does during the course of the workday. When it is unclear whether the employee can properly be classified as an exempt outside salesperson, the employer should obtain legal advice.

When an employee believes that he or she has been misclassified, the employee should also obtain legal advice. Misclassification may create an entitlement to collect unpaid overtime and other remedies. Information about how employees can seek those remedies is available in our article, How to File a Wage and Hour Claim in California.