Options for Paying Outside Salesperson Include Hourly or Salary Basis

I usually see information about paying outside salespeople commission payments. Is it OK to pay a salary and follow the minimum salary rules for exempt employees?

Yes, it is OK to pay outside salespeople a salary instead of a commission. Actually, an outside salesperson may be paid in any manner, including hourly.

Outside salespeople do not need to meet the minimum salary requirement that covers the executive, administrative and professional exemptions.

Outside Salesperson

Outside salesperson means any person, 18 years of age or over, who customarily and regularly works 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.

Any individual properly classified as an outside salesperson is exempt from coverage of Section 1 of the Wage Orders, meaning that the rules regarding minimum wage, overtime, meal and rest breaks, timekeeping, etc., do not apply.

In addition, the salary deduction rules for exempt administrative, executive, or professional employees do not apply to an outside salesperson who is paid a salary.

Develop Agreement

When paying a salary, it is best to consult legal counsel to develop an agreement that defines how the salary will be paid. What are the expectations? Will the salary be a based on a certain number of hours per workweek with deductions for absences, or will it be a guaranteed salary with no deductions for absences?

Although outside salespersons are not subject to the time record requirements, it is always OK to require a time record.

For additional information about the outside salesperson classification, visit HRCalifornia.com.

Column based on questions asked by callers on the Labor Law Helpline, a service to California Chamber of Commerce preferred and executive members. For expert explanations of labor laws and Cal/OSHA regulations, not legal counsel for specific situations, call (800) 348-2262 or submit your question at www.hrcalifornia.com.

Staff Contact: Barbara Wilber