Exempt Employees Part II: Computer Employees, Outside Sales Employees, and Employees Paid Commissions

By Andrew D. Randol - September 13, 2019 - Employment & Labor

In Exempt Employees Part I, our Columbus employment lawyer broke down the three primary exempt categories of executive, administrative, and professional employees. This post will focus on three additional categories of employees who may be exempt: computer employees, outside sales employees, and commissioned employees.

Computer Employees

Computer systems analysts, computer programmers, software engineers, or other similarly skilled workers in the computer field can also be classified as exempt. In order to meet this exemption, the computer employee: 1) must be paid a salary, 2) have duties that consist primarily of (i) the application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; (ii) the design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; (iii) the design, documentation, testing, creation or modification of computer programs related to machine operating systems; or (iv) A combination of the aforementioned duties, the performance of which requires the same level of skills.[1]

However, this exemption does not apply to employees engaged in the manufacture or repair of computer hardware and related equipment.[2]

There is an interesting twist with regard to salary as it applies to computer employees. A properly exempt computer employee can be paid either a salary or an hourly rate of no less than $27.63/hour. However, because they are exempt from overtime requirements, time and a half is not required for a properly exempt computer employee who works over forty hours in one week. The employee is simply paid the hourly rate of $27.63.[3]

Outside Sales Employees

The FLSA provides an overtime exemption for employees employed in the capacity of an outside salesman. This means the employee’s primary duty is 1) making sales 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; and 2) who is customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty.

This exemption can also be a tricky one for employers. It is typically meant for people hired to go out on the road and sell things, such as door to door salesmen, or other salesmen who make sales at the customers’ place of business. However, employers must use great caution when using this exemption. The key is that the employee has to be physically separated from the employer’s place of business. An employee working at the employer’s place of business who is making sales by mail, telephone, or internet is not included in this exemption. For purposes of this exemption, the employee’s home can be included as the employer’s place of business if the employee is using his or her home as a headquarters to make phone calls. The exemption is strictly meant for employees who are physically out and about making sales.[4]

Employees Paid Commission in Retail or Service Establishments

Employees who are paid fully or partially by a retail or service establishment may be exempt from overtime under the FLSA. The requirements are that 1) the employee must be employed by a retail or service establishment; 2) the employee’s regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked; 3) more than half the employee’s total earnings in a representative period must consist of commissions.[5]

However, employers should be cautioned, unlike many of the other exemptions, meticulous record keeping is required to comply with the law under this exemption. This exemption requires employers to track all hours worked by the particular employee in order to ensure that the second listed requirement above it met. If the employer cannot prove that the employee’s regular rate of pay exceeded one and one-half times the applicable minimum wage, then the employer may be subject to a lawsuit for overtime wages.

Because of the tedious requirements employers must meet to ensure an employee is properly classified as exempt, a Columbus employment attorney should be consulted ahead of time.

In Exempt Employees Part III, our Columbus employment lawyer will discuss the actual salary requirements employers must comply with to maintain the exempt status of its employees.

[1] 29 CFR § 541.400

[2] 29 CFR § 541.401

[3] 29 CFR § 541.400

[4] 29 CFR § 541.502

[5] 29 USC § 207(i)