Is there a difference between California and federal exemptions for sales people?

Both federal and California laws have exemptions for outside and commissioned sales persons. However, there are some distinct differences between California and federal law when determining which sales employees are exempt from minimum wage and overtime requirements.

Federal FLSA Requirements

Outside Sales

The FLSA requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at time and a half the regular rate of pay for all hours worked over 40 hours in a workweek. However, Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees.

To qualify for the outside sales employee exemption, all of the following tests must be met:

• The employee's primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer.
• The employee must be customarily and regularly engaged away from the employer's place or places of business.
  

The salary requirements of the regulation do not apply to the outside sales exemption.

Commissioned Sales

Similarly, Section 7(i) of the FLSA exempts certain employees of retail and service establishments who are paid on a commission basis, in whole or part, from the FLSA's overtime pay regulations.

A business must meet both of these requirements to be considered a "retail or service establishment:"

• Seventy-five percent of the annual dollar volume of the sales of goods or services (or of both) come from sales that are not resale.
• The sales of goods or services (or of both) are recognized as retail sales in the particular industry.

To qualify for the commission sales exemption, the employee must meet all of the following requirements:

• The employee must be employed by a retail or service establishment.
• The employee's regular rate of pay must exceed one and a half times the applicable minimum wage for every hour worked in a workweek.
• More than half of the employee's total earnings in a representative period must consist of commissions on goods or services.

California Labor Code Section 1171 Requirements

In accordance with California Labor Code Section 1171, any person 18 years of age or older who customarily and regularly spends more than half of his or her working time away from the employer's place of business selling tangible or intangible goods or obtaining orders or contracts for products, services or use of facilities is considered exempt from state minimum wage and overtime requirements under the outside or commission sales exemption.

Outside Sales Exemption

A California employee qualifies for the outside sales exemption if he or she:

• Is primarily engaged in sales.
• Spends more than 50 percent of working time away from the employer's place of business.
• Sells tangible or intangible goods.

Commissioned Sales Exemption

A California employee qualifies for the commissioned salesperson exemption if he or she:

• Is primarily engaged in sales.
• Has earnings exceeding one and a half times the California minimum wage.
• Has more than 50 percent of his or her earnings representing commissions.