Fair Labor Standards Act: Computer-Related & Outside Sales Exemptions

The Fair Labor Standards Act (FLSA) requires employers to pay employees minimum wage for all hours worked and overtime at a rate of time and one-half the regular rate of pay when an employee works more than 40 hours in a workweek. However, there are certain exemptions from both the minimum wage and overtime requirements of the FLSA. These five “white collar” exemptions (executive, administrative, professional, computer professional and outside sales) are defined by the Department of Labor (DOL) in the Code of Federal Regulations Part 541. This series will discuss the highlights of each exemption.

The Computer-Related Occupation exemption is probably one of the most easy to understand once you realize the regulations apply to individuals who are using systems analysis techniques and procedures or are designing, developing, documenting, analyzing, creating, testing or modifying computer systems or programs, including computer programs related to machine operating systems.

This particular exemption doesn’t apply to employees who are engaged in the manufacture or repair of computer hardware and related equipment. Also, this exemption wouldn’t generally apply to network administrators where the network has been designed by someone else or to computer installers who aren’t actually developing, analyzing, creating, designing, testing or modifying the computer system or program.

In addition to the duties test, these employees must also be paid a guaranteed weekly salary of $684 or an hourly rate of at least $27.63 per hour. This is the only white collar exemption that specifically allows employees to be paid on an hourly basis.

The Outside Sales exemption is exactly what it sounds like…individuals whose primary duty is selling and who customarily and regularly engages in such activity away from the workplace. Specifically, the test for the outside sales exemption states that to qualify for this exemption:

  • The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
  • The employee must be customarily and regularly engaged away from the employer’s place or places of business.

The FLSA Fact Sheet about the outside sales exemption says:

“’Sales’ includes any sale, exchange, contract to sell, consignment for sales, shipment for sale, or other disposition. It includes the transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property.

…Obtaining orders for “the use of facilities” includes the selling of time on radio or television, the solicitation of advertising for newspapers and other periodicals, and the solicitation of freight for railroads and other transportation agencies. The word “services” extends the exemption to employees who sell or take orders for a service, which may be performed for the customer by someone other than the person taking the order.”

Certain drivers who sell as well as deliver product may also qualify for this exemption. However, the driver’s primary duty has to be selling rather than delivering. To determine whether a driver is exempt, several factors should be considered including a comparison of the driver’s duties with those of “other employees engaged as drivers and as salespersons, the presence or absence of customary or contractual arrangements concerning amounts of products to be delivered, whether or not the driver has a selling or solicitor’s license when required by law, etc.”

There is no minimum required salary for an individual qualifying as exempt under the outside sales exemption.

More information about the FLSA’s Computer-Relations Occupation and Outside Sales exemptions can be found in the DOL’s Fact Sheets at http://www.dol.gov/whd/regs/compliance/fairpay/fs17e_computer.pdf and http://www.dol.gov/whd/overtime/fs17f_outsidesales.pdf.

Please note that individual states may have different minimum salary standards. Check out ADP’s article on Exempt Employees: Minimum Salary Requirements for 2022.

You can also view our latest micro-learning sessions…Make This Job Exempt! and I Have to Pay Employees for That?!

EAF members can also access our White-Collar Exemption Advisor interactive tool in our CCH HR Compliance Library.

EAF responds to hundreds of hotline calls and emails monthly. We would be happy to answer any interesting questions you may have too! Contacts us at [email protected] or 407.260.6556

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