Second Circuit Vacates Lower Court Decision Ruling Time Warner Territory Sales Representatives were Exempt from Overtime Pay

On October 4, 2018, the Second Circuit Court of Appeals vacated a decision by the U.S. District Court for the Northern District of New York which held that Territory Sales Representatives(TSRs) for a cable company were exempt from overtime pay because their primary duty was exempt outside sales.

Two TSRs, Jeffrey Sydney and Stephen Capousis, sued their former employer, Time Warner Entertainment-Advance/Newhouse Partnership (Time Warner), a subsidiary of Time Warner Cable, Inc., for unpaid overtime under the Fair Labor Standards Act(FLSA) and the New York Labor Law (NYLL). Time Warner moved for summary judgment, arguing that the TSRs were exempt from overtime pay under the FLSA and NYLL because they were “outside salesmen.” The District Court agreed with Time Warner and granted summary judgment. The plaintiffs appealed, arguing that the District Court was wrong to conclude that they were “outside salesmen.”

 Subject to certain exemptions,the FLSA and NYLL require that employers pay employees overtime pay for hoursmore than 40 worked in one workweek. One exemption from the FLSA and the NYLL is for “any employee employed . . . in the capacity of outside saleman.” To bean outside salesman, a worker’s primary duty must be either (1) making sales within the definition of the law, or (2) obtaining orders or contracts for services or for the use of facilities. In addition, the worker must be customarily and regularly engaged away from the employer’s place of business while performing their primary duty.

The Second Circuit held that the District Court was wrong to conclude that the TSRs’ primary duty was exempt sales of Time Warner’s products, as opposed to non-exempt installation of cable,telephone, and internet equipment.

According to the plaintiffs, TSRs spent most of their 50-70 hour workweeks installing cable, telephone, and internet equipment in apartment units, and spent a smaller portion of their time performing sales duties such as maintaining relationships with apartment managers and trying to persuade customers to purchase additional services and“bundles” of internet, telephone, and cable services.

The Second Circuit found that a reasonable factfinder could conclude that the TSRs spent most of their time performing non-exempt installation duties, and that, in this instance, their outside sales duties were not more important than their installation duties.Further, while TRSs were paid mainly on commissions, the majority of their “commissions” were in fact payment for installations rather than commissions for sales.

Because the Second Circuit did not find as a matter of law that the TSRs’ installation work was merely incidental to their outside sales work, it vacated the District Court’s decision and remanded the case for further proceedings.