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Working Outside an Employers Location does not an “Outside Salesperson” Exemption Make

Lerner & Weiss Feb. 20, 2023

In the matter of Georgina Espinoza v. Warehouse Demo Services, Inc., the court of appeal was presented with the question of whether an employee working at a fixed site not owned or leased by the employer is subject to the outside salesperson exemption where the employer controls the employee's hours and working conditions. 

The outside salesperson exemption was created because it has historically been difficult for an employer to control or monitor outside salespersons who control their own hours and schedule. “Outside salespersons” in California are exempt from statutory overtime, minimum wage, reporting time, and meal-and-rest break requirements, generating a financial and record keeping benefit to the employer. To qualify as an “outside salesperson,” an employee must 1) work more than half the time away from his or her employer's place of business; and 2) be engaged in sales.

Georgina Gonzales was employed as a demonstrator by Warehouse Demo Services, Inc., a company that exclusively provided product demonstrators for Costco. Espinoza brought a class action against defendant for labor claims. Warehouse Demo Services filed a motion for summary judgment that plaintiff’s claims failed as she fell under the outside salesperson exemption. The motion was granted, and the Plaintiff appealed.

While “Outside salespersons” are exempt from statutory overtime, minimum wage, reporting time, and meal-and-rest break requirements, the appeals court held the exception did not apply under the facts of this case.

First, Warehouse Demo Services is Costco's in-house product demonstration company and is exclusive to Costco. Although it is headquartered in Washington, all of its event managers, shift supervisors, and demonstrators are assigned to work in Costco warehouses. In other words, Costco was the only place respondent conducts business via its demonstration of products. Though it leases no space within Costco, Warehouse Demo Services maintained an office inside each warehouse where its employees can clock in and out, store and clean equipment, and handle paperwork. For all intents and purposes, Warehouse Demo Services operated out of and treated all these different Costco warehouses as their satellite branches or offices.

Second, unlike the typical traveling salesperson who sets his or her own hours and decides when and where to work, Espinoza had a set schedule every week and worked six-hour shifts. She clocked in before she started working, clocked out after she stopped working, and reported her lunch breaks when she clocked out. Espinoza was only assigned to work at one Costco location at a time, and in fact worked at the Almaden location for about five years before transferring to another Costco. Finally, Espinoza was supervised, and her schedule and sales quota were set by an on-site event manager who had been assigned to her warehouse by Warehouse Demo Services.

As Espinoza did not work away from her employer’s place of business, did not travel to different locations, and Espinoza’s hours and schedules were carefully monitored and controlled by defendant, the court find that the “Outside salesperson” exemption was not applicable.

This ruling makes clear that exemptions to the California Labor Code are not as simple as they appear, and the failure to properly apply them, both legally and factually, can lead to significant money sanctions and damages being incurred by an employer.

Lerner & Weiss represents employers of all sizes and industries to assure that they are in compliance with all labor regulations. We are happy to assist make sure that your company does not run afoul of the California labor laws.