NJ Department of Labor Proposes Re-Adoption of Inside Sales Exemption

As we previously reported on September 6, 2011, the New Jersey Department of Labor and Workforce Development (NJDOL) adopted the so-called “white collar” exemptions for Administrative, Executive, Professional, Outside Sales, and Computer employees as contained in the Federal Fair Labor Standards Act (“FLSA”). While the changes to the New Jersey law were designed to provide clarity to the state’s wage and hour landscape and consistency between the federal and New Jersey laws, they inadvertently eliminated a long-recognized exemption in New Jersey for commissioned inside salespersons. Because the New Jersey and federal exemptions for such sales personnel are different and were housed in different sections of the law — New Jersey’s treatment of inside salespersons was part of the “Administrative” exemption, whereas the FLSA addresses the issue in an entirely separate section — New Jersey’s replacement of its “Administrative” exemption with that found in the FLSA resulted in the deletion of the inside salesperson exemption. Acknowledging that this was an “unintended consequence,” the DOL has issued proposed regulations to reinstate the inside sales exemption to New Jersey law. In the November 21, 2011 New Jersey Register, the DOL proposed that the following language be added to N.J.A.C. 12:56-7.2 as section (c): “‘Administrative'” shall also include an employee whose primary duty consists of sales activity and who receives at least 50 percent of his or her total compensation from commissions and a total compensation of not less than $400.00 per week.” A public hearing on the re-adoption of this exemption is scheduled for December 13, 2011 and written comments must be submitted by January 20, 2012.

Until the inside sales exemption is re-adopted, employers should be particularly careful in the treatment of commissioned inside sales employees. While it is unlikely that the DOL would entertain overtime claims made by these employees, plaintiffs’ lawyers may try to use the DOL’s inadvertent oversight to file claims in the New Jersey courts in the coming months. In order to avoid such claims, employers should consider limiting the hours worked by commissioned inside salespersons to 40 or less per week until the proposed amendment is adopted.

If you have any questions regarding the treatment of employees as exempt or non-exempt or the proposed adoption of the inside sales exemption, please feel free to contact any one of the attorneys in the Gibbons Employment & Labor Law Department.