14 Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) Seyfarth Shaw LLP | www.seyfarth.com D. The Outside Sales Exemption The outside sales exemption is the broadest of all exemptions in that it exempts employees from all provisions in the Wage Orders, even minimum wage protections, and the outside sales exemption does not require that employees be paid on a salary basis.62 To qualify as an outside salesperson, an employee must “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.”63 This definition is slightly different from the definition of an outside salesperson under the FLSA, which provides that an employee is an outside salesperson if (1) the employee’s primary duty is 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; and (2) the employee is customarily and regularly engaged away from the employer’s place or places of business.64 In 1999, in Ramirez v. Yosemite Water Co.,65 the California Supreme Court held that the difference in the wording of the federal and state outside sales exemptions was intentional and that California therefore has an exemption narrower than the FLSA’s. In particular, California’s use of the phrase “more than half the employee’s working time” to define an outside salesperson indicated that employees could not qualify for the California exemption if they consistently spent more than one-half their time on work other than “outside sales” work.66 Ramirez also noted that there was no reference in the California definition to work “incidental to or in conjunction” with an employee’s sales work, which the court interpreted as excluding any such “incidental” work from the 50 percent standard.67 Nonetheless, Ramirez held that if the employer could show that it reasonably expected its employees to spend most of their time engaged in outside sales—even if the employee violated those expectations by not doing so— then the employer could still take advantage of the exemption.68 The facts of Ramirez were relatively straightforward and thus did not provide the Supreme Court with the opportunity to address more nuanced situations. The job at issue in Ramirez had employees spending virtually all their work time away from the employer’s place of business and doing essentially the same small set of tasks every day—driving to the homes of customers to deliver bottled water and attempting, where possible, to sell them additional water products. 62 IWC Wage Order 1-2001(1)(c) (“the provisions of this order shall not apply to outside salespersons”). By contrast, the white collar exemptions exempt employees only from Section 3 through 12 of the Wage Orders and other exemptions exempt employees only from Section 3 (governing hours of work). 63 IWC Wage Order 1-2001(2)(J) (defining “outside salesperson”). 64 29 C.F.R. § 541.500. 65 20 Cal. 4th 785 (1999). This decision was discussed above, in Section II.C, in the context of the executive exemption. 66 Id. at 797-98. 67 Id. at 797. 68 Id. at 802.
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