A route salesman who worked 72 hours per week and averaged only $6.66 per hour sued his employer under the Fair Labor Standards Act (FLSA). Was he underpaid?

What happened. In June 2010, “Lowell” accepted a sales position with Intelligent Mexican Marketing, Inc. (IMM), a Texas company that sells products to convenience stores. He received a salary of $300 per week plus commissions, which averaged $164 per week in 2010 and $233 per week in 2011.

Lowell typically arrived at the IMM warehouse at 6:30 AM and took his company truck on a route that included 17 to 22 convenience stores per day, where he would replenish stock and sell new products to attendants. He was also authorized to visit new stores and develop additional customers. At 5:00 PM, he would fill the truck with gas, return to the warehouse, wait in line to replenish his stock, and load the goods onto his truck for the next day, a process that took around 2 hours. He also attended weekly hour-long sales meetings.

In July 2011, Lowell filed a lawsuit seeking $3,080 in unpaid minimum wages and $15,244 in overtime pay under the FLSA. IMM countered that he was an FLSA-exempt outside salesman. A district court found for IMM, and Lowell appealed.

What the court said. The 5th Circuit Court of Appeals, which covers Louisiana, Mississippi, and Texas, affirmed the lower court’s finding that according to the factors separating an outside salesman from a delivery driver under the FLSA, Lowell’s primary duties were those of an outside salesman. The court noted that Lowell was “the only sales contact between IMM and the convenience stores on his route—any sales that were made were ‘significantly affected’ by [Lowell],” and that Lowell “never performed work that could not be classified as either sales or work incidental to sales.”

In addition, Lowell attended regular sales meetings where supervisors announced incentives and product promotions, and between 35 and 44 percent of his income came from commissions. As for Lowell’s hourly earnings, the court noted that “there is no way to eliminate the possibility that [Lowell’s] relatively low compensation was due solely to poor salesmanship; in any event (and perhaps for that very reason), the regulations do not indicate that a court should consider a salesman’s effective compensation in determining whether the exemption applies.” Meza v. Intelligent Mexican Marketing, Inc., 5th Cir., No. 12-10785 (6/18/2013).

Point to remember. The court noted that “because most of the salesman’s work is performed away from the employer’s place of business, the employer often has no way of knowing how many hours an outside salesman works.” As a result, “[a]n outside salesman’s extra compensation comes in the form of commissions, not overtime.”