“Inside Sales” Exemption Inadvertently Omitted in New NJ Wage and Hour Regulations

On September 6, 2011, the NJDOL amended the New Jersey Wage and Hour regulations regarding employees who are exempt from overtime. The amendment adopted Part 541 of the federal Fair Labor Standards Act (FLSA), which exempts executive, administrative, professional, computer and outside sales employees. Unfortunately, what was intended by the NJDOL to be a good change for employers that would eliminate inconsistencies between state and federal overtime law, has instead become a potential problem for New Jersey employers – at least for the time being. Omitted from the new amendment is the exemption for commissioned sales employees, commonly referred to as the “inside sales” exemption, a previous feature of the New Jersey overtime exemptions. Specifically, the repealed New Jersey rules included an exemption from overtime for any employee whose primary duty consisted of sales activity, and who received a regular weekly rate of pay of at least $400, and at least 50% of his or her compensation from commissions. Although the FLSA contains an inside sales exemption for commissioned sales employees of a retail or service establishment, that exemption was not adopted by reference by the NJDOL because it is not found in Part 541 – the only part adopted by the NJDOL.

The NJDOL has stressed the omission was an inadvertent mistake and has announced its intention to readopt the inside sales exemption as soon as possible. That process could take several months, however. While the NJDOL also has advised that it will not take action against employers that continue to rely on the exemption during the correction period, plaintiffs’ counsel may not take this same approach and could possibly argue that previously exempt inside sales employees are no longer exempt from the overtime requirements.

Accordingly, employers that have relied on New Jersey’s “inside sales” exemption should consider whether to continue to apply this exemption to their employees until the correction is made. They may also want to discuss with counsel whether any of the other exemptions under the new regulations may apply.