Outside Salesperson Exemption Does Not Apply If Employer Controls Hours and Working Conditions

In Espinoza v. Warehouse Demo Servs., Inc., the California Court Appeals addressed application of the Outside Salesperson Exemption that exempts workers from statutory overtime, minimum wage, and meal and rest break requirements.

In this case, Espinoza was an employee of Warehouse Demo Services (“Warehouse”), who worked in a Costco and performed demonstrations of products. Warehouse did not lease the space, but instead collected floor space rent on behalf of the companies whose products were demonstrated and then remitted payment on their behalf to Costco. Espinoza brought a class-action complaint alleging numerous Labor Code violations. Warehouse, however, argued that Espinoza fell within the outside salesperson exemption because she was engaged in selling outside of Warehouse’s place of business.

The trial court had held that Espinoza was covered by the exemption because Warehouse did not own or lease the site at which Espinoza worked. However, the Court of Appeals reversed. It held the correct inquiry is the extent to which the employer maintains control or supervision of the employee’s hours and working conditions. The Court of Appeals found Espinoza was assigned to work in a small, designated area at a fixed site; she was required to clock in and out for each shift; and she could not leave the area during her shift unless another employee relieved her, which does not comport with the purpose of the exemption. Therefore, Warehouse was determined to be liable to Espinoza, and potentially a class of employees of Warehouse similarly situated, for overtime, minimum wage violations, and meal and rest break violations.

Before you rely on the Outside Salesperson Exemption and do not pay statutory overtime, do not comply with the minimum wage laws, and/or do not require meal and rest breaks, discuss the matter with your legal counsel to ensure the Exemption will apply.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.