On May 18th, the Department of Labor (DOL) announced that anyone earning less than $47,476 in salary is eligible for overtime, with a few exemptions. Inside sales teams are impacted and so are more than an estimated 90,000 sales managers, according to the DOL. This has implications on not only base pay but also non-discretionary bonus calculations. When someone earns overtime, the employee is eligible for an increase in base pay and a corresponding increase on bonuses/contest awards during the same period. 

We’re not lawyers, of course, so we’re not providing legal advice and recommend that you discuss the impact of this change in overtime status with your legal counsel. (For example, it may be worth checking with your legal counsel to see if the specific exemption for “outside sales,” as defined in the Fair Labor Standards Act, applies to your sales team.)

This is the first of three posts in our series on the rule change and overtime that will be coming out in the next few weeks. In later posts, we will be diving into the meaning of this change to sales organizations. In this first post, we wanted to kickstart the conversation about this change. (Please note that we are providing the links below for informational purposes and are not commenting on the accuracy of any of these statements/interpretations, or endorsing any of the views on these sites.) 

Here’s how to get the discussion started: 

1. Select a news source that has provided overviews of the changes.

• The WSJ wrote about the changes on May 18th.
• CNN also posted an article that does not require a subscription to view. 

2. Read the DOL posts related to the change in overtime.

• The DOL’s summary of the rule changes
• An overview of the DOL’s point of view on options to adjust to the new overtime rule
• The DOL’s overview of who will benefit from the change 

3. Review sources that discuss the outside sales exemption.

• The DOL’s historical definition of the outside sales exemption
• Replicon posted an overview of their interpretation of how inside sales people are eligible for overtime and a corresponding increase in bonuses but not outside sales. 

4. Refresh your knowledge about how to adjust sales bonuses for overtime.

• Three examples of how bonuses would need to be prorated
• California courts have ruled on how bonuses can be prorated for overtime. 

There are potential financial penalties if you do not comply with this rule, so if you haven't already, you should proactively reach out to your labor law experts to determine if your sales team's base pay and variable pay are impacted. 

In the coming weeks, we will discuss the rule and what’s changing, which roles within sales organizations might be impacted, common ways to prorate bonuses for overtime, and which key decisions that sales organizations will need to address in the wake of the changes.