FLSA2007-4 — Resort timeshare salespeople and section 13(a)(1)

U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

FLSA2007-4

January 25, 2007

Dear Name*:

This is in response to your correspondence requesting an opinion regarding whether timeshare
salespeople at resort properties may qualify for the outside sales exemption from the minimum
wage and overtime requirements provided by section 13(a)(1) of the Fair Labor Standards Act
(FLSA) and the implementing regulations at 29 C.F.R. Part 541.
1
It is our opinion that the
salespeople do not qualify for the outside sales exemption.

You describe three very similar groups of employees whose primary duty is to promote and to
sell timeshare interests in resorts to prospective owners. The first group of employees, Group
One, works from locations some distance (two to five miles) away from the resort sites.
Groups Two and Three work primarily at the resorts.

Group One employees greet the “prospects,” who have been scheduled by employees not at
issue here, at the sales office and show them an introductory film. Group One employees do
not have an “office” at the sales office, but merely gather at the facility a few minutes before
they are scheduled to meet the prospects. After the film, the salesperson drives the prospects to
the resort and gives them a tour of the property, including the residences, buildings and
grounds, streets, walking paths, spas, golf courses, and other facilities the resort property offers.
After touring the property and if the prospect decides to purchase a timeshare interest, the
Group One salesperson returns the prospects to the sales office to handle the closing process.
The total process takes 2-3 hours, and the average salesperson gives 1-3 tours a day for a total
of 30-40 hours a week, but may work more from time to time.

Group Two employees perform work almost identical to that performed by Group One
employees, except that Group Two employees meet the prospects at the resort instead of at the
off-site sales office, and therefore do not drive the prospects to and from the resort. Group
Three employees are likewise very similar except that they have a larger role in scheduling
their prospects. Their prospects come from people who already are staying at the resort as
guests and who respond to promotional incentives, who request to see a presentation, or who
are directly solicited by the salesperson. In all other material respects, all salespeople perform
the same duties: greeting prospects, showing an introductory film, giving a tour of the property
and any other facilities or attractions the resort property offers, closing the deal with interested
prospects, and engaging in occasional sales-related training.

Section 13(a)(1) of the FLSA provides an exemption from the statute’s minimum wage and
overtime requirements for “any employee employed . . . in the capacity of outside salesman.”
The Department’s regulations define that phrase as including “any employee”:

1
Unless otherwise noted, any statutes, regulations, opinion letters, or other interpretive material cited in this letter
can be found at
www.wagehour.dol.gov.

(1) Whose primary duty is:

(i) making sales within the meaning of section 3(k) of the Act, or

(ii) obtaining orders or contracts for services or for the use of facilities for which
a consideration will be paid by the client or customer; and

(2) Who is customarily and regularly engaged away from the employer’s place or places
of business in performing such primary duty.

29 C.F.R. § 541.500. “Primary duty” means “the principal, main, major, or most important
duty that the employee performs.” 29 C.F.R. § 541.700. FLSA section 3(k) defines “sale” as
“any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other
disposition.” See also 29 C.F.R. § 541.501.

Under 29 C.F.R. § 541.701, “[t]he phrase ‘customarily and regularly’ means a frequency that
must be greater than occasional but which, of course, may be less than constant. Tasks or work
performed ‘customarily and regularly’ includes work normally and recurrently performed every
workweek; it does not include isolated or one-time tasks.”

The regulations provide further guidance regarding what it means to be “engaged away from
the employer’s place of business” for purposes of 29 C.F.R. § 541.500. “The outside sales
employee is an employee who makes sales at the customer’s place of business or, if selling
door-to-door, at the customer’s home. Outside sales does not include sales made by mail,
telephone or the Internet unless such contact is used merely as an adjunct to personal calls.”
29 C.F.R. § 541.502. Outside sales employees may perform promotional work as an exempt
outside sales activity if it “is actually performed incidental to and in conjunction with an
employee’s own outside sales or solicitations.” 29 C.F.R. § 541.503. Whether promotional
work is to be considered exempt is determined on a case-by-case basis. Id.

You ask that we assume that the selling activities of the individuals in question culminate in
their making sales within the meaning of section 3(k) of the FLSA, and that all sales
representatives are engaged in making their own sales or in activities that are directly and
closely related to their own sales efforts as required by the regulations. Therefore, the question
that remains is whether the salespeople are customarily and regularly engaged away from the
employer’s place of business in performing their primary duty of making sales. A resort such
as the one you describe is generally maintained on a permanent basis as a location of the
employer and is staffed with the necessary personnel for maintaining the resort facilities. We
understand that although the employer sells timeshare interests in some of the properties on the
resort, the employer also retains a continuing business interest in the remaining resort facilities,
and in maintaining both the resort and the timeshare units that have been sold. Under these
facts, the entire resort must be considered the employer’s place of business. This position is
consistent with the Department’s previous conclusions that employees selling developed
campsites from within a “condominium” campground, and apartment rental agents who never
leave the apartment community, are not exempt outside sales employees because they never
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leave the employer’s place of business. See Wage and Hour Opinion Letter July 31, 1973
(campground sales employees); Wage and Hour Opinion Letter Dec. 21, 1971 (apartment rental
agents) (copies enclosed). The Department has reached a different conclusion in cases
involving real estate sales employees selling lots of land from a model home on a subdivision,
who customarily and regularly leave the model home, because the employer does not maintain
a continuing interest in the subdivision lots once they are sold or in the other facilities in the
subdivision, and thus these areas are not part of the employer’s place of business. Wage and
Hour Field Operations Handbook § 22e06(c).

Although the Department has not previously taken a position regarding whether the section
13(a)(1) outside sales exemption applies to employees who sell timeshares on site at resorts,
see Wage and Hour Opinion Letter Feb.1, 1985 (copy enclosed), after giving the matter careful
consideration, the Department believes that the outside sales exemption does not apply to
employees who sell timeshares on site at resorts because these employees are not “engaged
away from the employer’s place or places of business.” 29 C.F.R. § 541.500. You explain that
Group One employees split their time between the sales office and the resort property. While
you say that the Group One employees do not have an “office” at the sales office, it appears to
be property of the employer, and the Group One employees return there to perform deal closing
functions. Therefore, this qualifies as a place of business of the employer. Similarly, as
described above, the entire resort qualifies as a place of business of the employer. All of the
Group One employees’ sales activities occur either at the sales office or at the resort property,
both of which qualify as the employer’s places of business. Therefore, it is our opinion that the
Group One employees do not satisfy the outside sales exemption because they do not engage in
sales away from the employer’s place or places of business.

Analysis of the Group Two and Three employees is similar. While you do not indicate where
the Group Two and Three employees start their sales presentations, we presume that there is a
sales office or area from which the tours regularly start that is analogous to the model home.
Therefore, as with the Group One employees, Group Two and Three salespeople never leave
the employer’s place of business, namely, the resort, and therefore do not qualify for the
outside sales exemption.

This opinion is based exclusively on the facts and circumstances described in your request and
is given based on your representation, express or implied, that you have provided a full and fair
description of all the facts and circumstances that would be pertinent to our consideration of the
question presented. Existence of any other factual or historical background not contained in
your letter might require a conclusion different from the one expressed herein. You have
represented that this opinion is not sought by a party to pending private litigation concerning
the issue addressed herein. You have also represented that this opinion is not sought in
connection with an investigation or litigation between a client or firm and the Wage and Hour
Division or the Department of Labor.

We trust that the above is responsive to your inquiry.

Sincerely,

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Paul DeCamp
Administrator

* Note: The actual name(s) was removed to preserve privacy in accordance with 5 U.S.C.
§ 552(b)(7).
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