Local Federal Court Rejects Overtime Claim of Employee Performing Half Her Sales Duties Outside Office

The U.S. District Court in Alexandria, VA recently granted summary judgment to a defendant employer in a case concerning the “outside sales exemption” of the Fair Labor Standards Act (FLSA).  In Dixon v. Prospect Mortgage, LLC (No. 1:13-cv-01434), Judge James Cacheris ruled that because the employee spent significant time outside the office each week as part of her sales duties, the exemption applied to her as a matter of law.

Prospect Mortgage, LLC (“Prospect”) is a California-based mortgage company.  The plaintiff, Alice Dixon (“Dixon”) was employed by Prospect as a mortgage loan officer for almost three years.  Following the termination of her employment, Dixon joined an ongoing lawsuit involving several of Prospect’s former mortgage loan officers, alleging that Prospect had violated the FLSA by failing to pay her necessary minimum wage and overtime.  The FLSA, of course, requires an employer to pay minimum wage and overtime compensation to employees who work more than forty hours per week.  See 29 U.S.C. §§ 206(a)(1), 207(a)(1)

In response, Prospect argued that Dixon was exempt from the FLSA’s overtime and minimum wage requirements under the “outside sales exemption,” which provides that employers are not obligated to pay overtime and/or minimum wage for any employees acting as an “outside salesperson.”  See 29 U.S.C. § 213 (a)(1).  The statute and its accompanying regulations define an “outside salesperson” as an employee whose “primary duty” is to generate sales/secure orders, and who “customarily and regularly” engages in sales-related activities away from the employer’s place of business.

As neither party disputed that Dixon’s primary duty as a mortgage loan officer was to make sales (within the meaning of the statute), the question addressed raised by the Defendant’s motion for summary judgment was simply whether Dixon “customarily and regularly engaged in” sales activities away from Prospect’s office.

In deciding whether a material dispute of fact existed as to this critical issue, Judge Cacheris considered Dixon’s employment contract, which specified that her primary duty was to sell mortgages away from Prospect’s office.  Most importantly, however, Dixon herself had admitted that she “spent approximately half of her time each week outside of the office contacting referral sources and “attending seminars and trade shows, meeting with financial planners and realtors, and giving presentations[.]”  Accordingly, the court concluded that “no rational trier of fact” could find that Dixon was misclassified as an exempt employee, and granted Prospect’s Motion for Summary Judgment.

This decision illustrates the degree of specificity and scrutiny the courts will apply when reviewing an employer’s “exemption” defense, as well as the impressive strength of such an affirmative defense when supported by sufficient facts.