Second Circuit interprets the "outside salesman" exception under the FLSA

The Fair Labor Standards Act entitles you to overtime unless you fall within one the statute's many exceptions. The plaintiffs here fall within the "outside salesman" exception and therefore cannot get any overtime.

The case is Flood v. Just Energy, issued on September 19, which along with Flood gave us two FLSA rulings on the same day in favor of employers, sort of a double-whammy for the American worker, at least the ones living in the Second Circuit.

Plaintiffs engaged in door-to-door solicitation to persuade customers to buy Just Energy's electricity or natural gas. Being a salesman is hard enough when you have the door slammed in your face by irate homeowners who are eating dinner or watching TV when someone is trying to sweet-talk you into buying a service that you do not want or already have. The salesmen here worked more than 40 hours a week dealing with the fickle American consumer only to discover they were not getting paid overtime. So then went to court. The court also says no. As it happens, courts around the country are divided on whether Just Energy's salespersons are entitled to overtime. The Second Circuit says they are not.

Under the regulations, an outside salesman is someone whose primary duty is "making sales" or obtaining orders or contracts for services or the use of facilities, and who is customarily and regularly engaged away from the employer's place of business in performing these primary duties.

Plaintiff Flood falls within the exception. He was "making sales" by going door-to-door selling Just Energy's products, and he got paid only when he was able to talk someone into signing the contract. Flood argues that he was not "making sales" because defendant had discretion to reject the contracts he secured from customers. That's an interesting argument, but the Court of Appeals (Kearse, Livingston and Meyer [D.J.]) says, "we do not agree that the outside salesmen exemption requires a showing that a selling employee has an unconditional authority to bind the buyer or his employer to complete the sale." Authority for this proposition lies with the Supreme Court's ruling in Christopher v. SmithKline (2012), which "declined to interpret the 'making sales' requirement to mandate a showing that an employee has fully consummated a sales transaction or the transfer of title to property." The Court in Christopher also counseled against the use of technicalities to defeat the outside salesmen exception.

At the end of the ruling, the Second Circuit also agrees with the district court's collateral estoppel ruling, which said that plaintiff could not benefit from a contrary district court ruling against Just Energy in Ohio. That case, Hurt v. Just Energy, was similar to this one, but there is no offensive collateral estoppel for Flood because the Hurt case only addressed the "making sales" prong of the outside salesman exception and not the "obtaining orders or contracts for services" element. Also, Just Energy has not yet had a chance to appeal the Hurt ruling, which also cuts against Flood in the collateral estoppel equation.