Labor & Employment Law Daily Wrap Up, WAGE-HOUR—EXEMPTIONS—D. Md.: Sales reps for grocery distributor not exempt from FLSA as outside salespeople, (Aug 5, 2025)

By Ronald Miller, J.D.

To determine whether the employees are outside salespeople for purposes of the FLSA, the court considers (1) whether the employees make sales in their roles as sales representatives and (2) whether making sales is their primary duty.

On remand from the U.S. Supreme Court, a federal district court in Maryland concluded that an employer failed to establish by a preponderance of the evidence that its sales representatives were exempt from the overtime protections of the FLSA as outside salespeople. The evidence did not establish that the employees made their own sales at chain stores, but that such sales negotiations occurred at a higher level in the organization. The court also concluded that the employer had not proven by a preponderance of the evidence that the employees’ primary duty was making sales at either independent or chain stores. Thus, the court concluded that judgment should again be entered in favor of the employees (Carrera v. E.M.D. Sales, Inc., No. JKB-17-3066 (D. Md. July 31, 2025)).

The employer, E.M.D. Sales, distributes Latin American, Caribbean, and Asian food products to grocery stores in the Washington, D.C. area. It delivers products directly to stores and provides supplementary services, including stocking and conditioning shelves, at those stores. The employees in this lawsuit are sales representatives for the employer.

Sales representatives. According to the employees, they regularly work around 60 hours per week. The employer assigns each sales representative a sales route comprising both chain and independent stores and a personal digital assistant (PDA) device, which permits reps to place orders for EMD products. Sales reps are not paid an hourly wage. Instead, pursuant to collective bargaining agreements, their compensation is based entirely on commissions on sales of EMD products.

Sales representatives spend most of their time outside the employer’s main office servicing stores on their routes, but the parties dispute whether the sales reps’ primary duty is to make sales of EMD products. The sales representatives testified that their primary responsibility is essentially inventory management. By contrast, the employer emphasized that their main responsibility is to sell EMD products.

Corporate policies. A core issue in the parties’ dispute is whether the sales representatives can make their own sales of EMD products at chain stores, which constitute at least half of their business. EMD establishes its business relationships with chain stores at the highest levels of its organization. EMD representatives persuade chain stores to buy their products and negotiate quantity, price, and other terms.

Testimony of chain store corporate category buyers and store managers served by EMD established that chain store managers are given diagrams indicating where to place items on shelfs. Both in policy and practice, store managers are not permitted to deviate from the diagrams. Such testimony suggested that chain store managers would not be receptive to solicitations by EMD sales representatives to buy additional products beyond the plan set forth by corporate, said the appeals court.

Nonetheless, the court credited testimony establishing in some instances, at certain stores, there may be some divergence between corporate policy and practice such that chain store managers may not always follow diagrams and plans for movable displays.

Independent stores. By contrast, EMD’s relationship with independent stores is much less structured and generally involves fewer levels of the corporate hierarchy. Sales representatives are encouraged to open new accounts and to increase both the type and quantity of EMD products sold to existing accounts. Although independent store managers were not subject to the same ordering restrictions as chain store managers, independent stores lacked the storage space to buy in bulk from EMD.

Outside sales exemption. The FLSA exempts outside salespersons from the Act’s overtime pay requirements. Though Congress did not define the term “outside salesman,” the Department of Labor has promulgated relevant regulations. The Supreme Court has identified three regulations that are “directly relevant” to the outside sales exemption: the general regulation, the sales regulation, and the promotion-work regulation.

The general regulation provides that an outside salesperson is any employee whose primary duty is making any sale, exchange, contract to sell, consignment to sale, shipment for sale, or other disposition. The sales regulation provides that the FLSA’s definition of “sales” includes the transfer of title to tangible property, and in certain cases, of tangible and valuable evidence of intangible property. “The promotion-work regulation identifies ‘promotion work’ as ‘one type activity often performed by persons who make sales, which may or may not be exempt outside sales work, depending upon the circumstances under which it is performed.”

Another regulation that provides helpful guidance in this case is 29 C.F.R. § 541.504, which provides that drivers who deliver products and also sell such products may qualify as exempt outside sales employees only if the employee has a primary duty of making sales.

Preponderance of the evidence standard. Here, the court was required to assess whether the employer had established the outside sales exemption by a preponderance of evidence standard, as opposed to the clear and convincing evidence standard. The court agreed with the employer’s contention that the employees “are entitled to no deference and no assumption that a finding in their favor presently exists.”

There was no dispute that the employees established the elements of an FLSA claim at trial. Rather, the issue was whether the employer proved by a preponderance of evidence that the outside salesperson exemption applied. To determine whether the employees are outside salespeople for purposes of the FLSA, the court considers (1) whether the employees make sales in their roles as sales representatives and (2) whether making sales is their primary duty.

Previously, the court concluded after a bench trial that the employer failed to prove by clear and convincing evidence that the employees fell within the outside salesperson exemption. The Fourth Circuit affirmed. The Supreme Court reversed, concluding that the preponderance of the evidence standard applies, E.M.D. Sales, Inc. v. Carrera, 604 U.S. 45 (2025). The court now concludes that the employer has not established by a preponderance of the evidence that the exemption applies.

Making sales. The court concluded that, although the employer established by a preponderance of the evidence that the employees made their own sales at independent stores, it did not establish by a preponderance of the evidence that the employees made their own sales at chain stores. Rather, the evidence reflected that the employees’ role at such stores was essentially inventory management, and that the sales negotiations occurred at a higher level at EMD.

The evidence reflected that the employees did not make their own sales to chain stores, and it showed that the employees’ duties did not constitute exempt sales work, given that “promotional work that is incidental to sales made, or to be made, by someone else is not exempt outside sales work.”

Primary duty. The court also concluded that the employer had not proven by a preponderance of the evidence that the employees’ primary duty was making sales at either independent or chain stores. Rather, the evidence reflected that the employees spent very little time on activity that could be considered “selling” at chain stores. Instead, they spent most of their time on activities such as ordering and replenishing stock, and cleaning and organizing shelves.

There was a closer question with respect to independent stores. The evidence reflected that, though sales representatives sometimes established the relationship with independent stores, the initial relationship and the sales were often negotiated by other EMD employees. Further, the evidence reflected that the employees’ duties with respect to independent stores were largely limited to placing orders for products, not selling products. Thus, although the employees could make sales to independent stores, such activity was not their primary duty there.

Finally, the evidence reflected that the vast majority of the employees’ time was spent at chain stores, not at independent stores, such that the majority of their efforts were directed at chain stores. Accordingly, the court concluded that the employer did not show by a preponderance of the evidence that the employees’ primary duty was making sales.

The case is No. JKB-17-3066.

Judge: Bredar, J.

Attorneys: Omar Vincent Melehy (Melehy and Associates) for Faustino Sanchez Carrera, Jesus David Muro, and Magdaleno Gervacio. Eduardo Samuel Garcia (Stein Sperling Bennett De Jong Driscoll) for E.M.D. Sales, Inc.

Companies: E.M.D. Sales, Inc.

Cases: WageHour Exemptions Overtime FederalRegulations MarylandNews