Salesperson Exemptions: How They Apply to Your Business
- Trudy Seeger
- Sep 21
- 5 min read
Many businesses use salespeople to grow revenue, but not all sales roles are treated the same under employment laws. One important distinction is whether a salesperson can be exempt from certain employment law protections — for example, minimum wage, overtime, rules on hours worked, etc. Misclassifying a salesperson as exempt when they do not meet the legal criteria can lead to legal exposure, back pay, fines, and reputational risk.
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This article explains what a salesperson exemption generally means, the legal criteria that must be met, jurisdictional differences in the United States and Canada, common mistakes, and what your business should do to evaluate and apply the exemption properly.
Salesperson Exemptions Defined
A salesperson exemption refers to a legal status in which a salesperson is exempt from certain employment law protections. These protections can include overtime pay, minimum wage in some cases, and rules about rest periods, hours worked, or record-keeping.
The outside sales exemption is one common form. Under the U.S. Fair Labor Standards Act (FLSA), “outside sales employees” are exempt from minimum wage and overtime requirements if they satisfy specific criteria. In Canada, employment standards vary by province. In Alberta, for example, salespersons and direct sellers have certain exemptions from overtime, general holidays, and other rules. In Ontario, outside salespersons are exempt from certain hours-of-work and overtime rules if they meet specific conditions.
You may want to read the following articles that talks about the Ontario salesperson exception in detail:
Criteria for Salesperson Exemption
To qualify as exempt, the salesperson must satisfy legal tests. These include:
Primary Duty – The main duty must be making sales, obtaining orders, or securing contracts. Occasional sales do not count; it must be the central function.
Away from Employer’s Business Location – The salesperson must be customarily and regularly engaged away from the employer’s place of business, selling at customer locations, homes, or events. Working primarily by phone or online from home generally does not qualify.
Customarily and Regularly – The salesperson must be engaged in outside sales work more than occasionally. A weekly or routine pattern is expected.
Incidental Work – Duties incidental to sales, like travel, delivering samples, or attending trade shows, are counted. Excessive non-sales duties that dominate the role may disqualify the exemption.
No Salary Requirement (U.S. Outside Sales) – Unlike many other exemptions, the outside sales exemption under U.S. law does not require a minimum salary threshold, provided the duties test is satisfied. Same in Ontario, and probably most provinces in Canada. A part-time salesperson is still a salesperson regardless of how much he or she makes.
Jurisdictional Variations
In the U.S., the FLSA provides the baseline exemption test, but states may have additional requirements. For example, some states set stricter definitions or impose salary floors.
In Canada, employment standards vary widely. In Alberta, travelling salespersons and direct sellers are exempt from general holidays and overtime, while in Ontario, outside salespersons are exempt when they receive commissions and make sales away from the employer’s premises. Each province’s law must be reviewed carefully.
Common Misconceptions and Pitfalls
Job title is not enough – A job title such as “Outside Sales Rep” does not automatically qualify. The actual duties performed matter.
Home office does not always count – Working from a home office may still be treated as working from an employer’s place of business, so it might not satisfy the “away” requirement.
Too many non-sales duties – If administrative or service tasks dominate the job, the primary duty test may not be met.
Poor documentation – Without records of travel, sales activity, or client visits, it may be difficult to prove the exemption applies.
Failure to re-assess – When roles evolve and include more inside sales or remote work, the exemption may no longer apply.
Ignoring provincial/state laws – Even if federal law exempts a role, local rules may impose stricter obligations.
Business Implications
For employers, misclassification of salespeople can result in back pay, penalties, legal costs, and even class-action suits. Therefore, businesses should:
Audit sales roles to verify if they meet exemption criteria.
Draft job descriptions accurately reflecting duties.
Maintain documentation like sales logs, travel records, and commission agreements.
Train HR and managers to understand exemptions.
Reassess exemption status when job roles evolve.
Consult with employment counsel for borderline cases.
Examples of Application
Alice, who spends most of her time travelling to client sites to sell machinery, is likely exempt. Bob, who sells insurance mainly from his home office by phone, is likely not exempt. Carol, with a sales title but primarily doing inventory and administrative work, likely fails the exemption. Dave, a travelling commission-based salesperson, is the typical exempt case.
Risks of Misclassification
Employers risk owing unpaid overtime, fines, and reputational harm. In the U.S., lawsuits are common in this area, and in Canada, labour standards officers can impose penalties for misclassification.
Salesperson Exemptions in the U.S. and Canada
In the U.S., the FLSA exemption requires the primary duty to be making sales and working away from the employer’s business. In Canada, provinces like Alberta and Ontario have distinct definitions of salespersons and varying exemptions. This makes it crucial for businesses with cross-border operations to understand both systems.
Best Practices
Employers should map out job duties, compare them with legal standards, document activities, train HR staff, review classifications regularly, and consult legal experts. Transparency with employees about their status helps avoid misunderstandings.
Anchor Reference
Businesses in other industries can also learn from how exemptions apply. For example, industries like car detailing Calgary also face classification challenges for workers who may or may not fall under special exemptions depending on the nature of their duties.
Conclusion
Salesperson exemptions can simplify compensation and reduce administrative burdens, but they are not automatic. Employers must apply the tests carefully, document activities, and stay aware of changing roles and legal standards. Misclassification is costly, but with audits, training, and legal advice, businesses can protect themselves while ensuring fair treatment of their sales force.
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As an employee, if you’ve been a victim of misclassification, don't wait or there might be serious health implications to your mental and physical health.
You may want to consult with an experienced employment law firm, such as HTW Law, to learn about your employment law rights and your legal options.
With the right legal support, employees can navigate the challenges of unfair practices and work towards a more equitable and respectful work environment.
You don't have to fight the battle alone. Speaking with an employment lawyer who is familiar with the laws and regulations regarding misclassification, workplace harassment and disability discrimination, and constructive dismissal will go a long way. If you are in doubt, it's essential that you reach out for help as soon as possible right away.
Click here to contact HTW Law - Employment Lawyer for assistance and legal consultation.
Author Bio:
Trudy Seeger is a seasoned freelance content writer with extensive experience in crafting insightful articles for prominent legal blogs and websites. He specializes in creating content that simplifies complex legal topics, ranging from personal injury and employment law to contract disputes and intellectual property. With a keen focus on how legal developments impact businesses and individuals, Trudy has a proven track record of delivering well-researched, engaging, and informative legal content.
