I just got a job as a salesperson. On the first day of the job my employer told me that I would not earn overtime because I would be working as an “outside salesperson.” Is this right? I’ve never worked as a salesperson before, but it seems to me like I should earn overtime like any other employee.


Your employer may be correct. Though the majority of employees in California are entitled to overtime and other benefits of California’s wage and hour laws, there are exemptions to these laws. Where an employee meets the requirements of such an exemption, he or she will not be entitled to overtime pay.

One such exemption is the “Outside Salesperson” exemption. To qualify as an outside salesperson, an employee must:

  • be 18 or older; and
  • customarily and regularly work more than half the working time away from the employer’s place of business selling tangible or intangible items or obtaining orders or contracts for products, services, or use of facilities.

Under California law, a home office is considered an employer’s place of business. Therefore, working from home will not make you an Outside Salesperson. The Outside Salesperson exemption exempts the employee completely from the California wage and hour laws and means that an employer need not pay overtime—or even minimum wage—to an employee who meets the requirements of the exemption.

In June 2012, the U.S. Supreme Court issued an interesting decision that involved the definition of “selling” under the outside sales exemption. The case involved pharmaceutical sales representatives. These employees appear to meet the outside sales exemption because they worked outside the employer’s premises nearly 100% of the time, are trained in sales, and are compensated with incentive pay based on how well “their drug” is selling in their assigned territory.  However, by law, these sales representatives cannot enter in to a binding agreement that a doctor will prescribe the drug to a patient, but they can obtain a non-binding agreement that the doctor will prescribe the drug in appropriate cases.   The plaintiffs in the case argued that their work is really just non-exempt “promotion” work rather than the necessary “sales” work to trigger the exemption. The court disagreed and held that these employees qualified as outside salespersons because they “sell” as that concept is understood in the pharmaceutical industry. The California Division of Labor Standards Enforcement also recognizes “sales promotion” as an exempt sales activity.

There is also a more narrow exemption in California called the “Inside Salesperson” exemption. This exemption only applies to certain industries that fall under Industrial Welfare Commission Wage Order 4 (professional, technical, clerical, mechanical, and similar occupations) and Wage Order 7 (employees in the mercantile industry). The Inside Salesperson exemption exempts employees from overtime regulations, and does not affect minimum wage requirements.  To qualify as an inside salesperson, an employee must:

  • have a regular rate of pay in excess of 1.5 times the minimum wage; and
  • earn more than half of his or her compensation for a representative period of at least a month from sales commissions. 

If you are over 18 years old and will spend most of your time out in the field selling, you are most likely an exempt outside salesperson and you will not be entitled to overtime.
– – – – – – – – – – – – – – – – – – – – – – – – – –
Back to Menu- Work Place Law 2012 Articles