In a BLR webinar titled "Exempt or Nonexempt? How To Avoid the Misclassification Mistakes You Simply Can't Afford To Make," Joseph K. Mulherin, Esq., explained that inside sales employees are most likely nonexempt.

The Department of Labor (DOL) issued an Administrator's Interpretation leaving little doubt that an employee cannot be exempt under the administrative exemption if the primary duty is sales.

• Reversing a prior opinion, the DOL concluded that mortgage loan officers do not qualify for the administrative exemption, because their sales work constitutes nonexempt production work.
• The DOL stated that "[t]he typical job duties of a mortgage loan officer comprise a financial services business' marketplace offering, the selling of loan products. Their duties involve the day-to-day carrying out of the employer's business and, thus fall squarely on the production side of the business."
• Plaintiff's attorneys have filed numerous lawsuits (with success) alleging that mortgage loan originators are nonexempt as inside sales persons.
• However, an employer recently won a jury trial challenging the exempt status of mortgage loan originators in Henry v. Quicken Loans, Inc. (E.D. Mich. 2011). While this case is likely to be appealed, the decision shows how ludicrous these lawsuits can seem to the average person.

The DOL's Administrator's Interpretation is not limited to the mortgage loan officers. It applies to all employees who sell from inside their employer's place of business or their home.

Why won't the outside sales exemption apply? The answer is simple: inside salespeople do not sell outside.

The regulations provide: "[T]he outside sales employee is an employee who makes sales at the customer's place of business or, if selling door-to-door, at the customer's home. Outside sales do not include sales made by mail, telephone or the internet unless such a call is an adjunct to personal calls." 29 C.F.R. § 541.502. An "employer's place of business" includes an employee's home office. Id.

If you want to classify your sales persons as exempt, you need to ensure that employees actually "sell" to customers outside the employer's office and employee's home office. Meeting with referral sources will probably not suffice.

Joseph K. Mulherin, Esq., is a senior associate in the Labor and Employment Practice Area at Vedder Price PC. Based out of the firm's Chicago office, he counsels and represents public- and private-sector employers nationwide in a variety of traditional labor and employment law matters. Mulherin has significant experience with wage and hour matters, having counseled clients on a multitude of issues and successfully litigated numerous single-plaintiff cases and large class actions. He can be contacted at jmulherin@vedderprice.com.