Prior to September 6, 2011, certain "inside sales" employees were exempt from the overtime pay requirements under New Jersey law. However, in recently revising the state regulations, the New Jersey Department of Labor and Workforce Development ("NJDOL") accidentally eliminated the state's inside sales overtime exemption. As a result, employers may have to pay overtime pay to inside sales employees who were never previously entitled to overtime pay. Fortunately, the NJDOL admitted it never intended that the new regulation destroy New Jersey's inside sales overtime pay exemption — a result that the NJDOL "intends to reverse as soon as possible." However, the expected "fix" could take several months, and for the time being, many New Jersey employers are left vulnerable to potential unpaid overtime claims by inside sales employees under New Jersey law.
A Funny Thing Happened While Helping Employers...
Under federal and the old New Jersey regulations, employers did not have to pay overtime rate for certain "inside sales" employees — specifically, any employee whose primary duty consisted of sales activity, who received a regular weekly rate of pay of at least $400, and who earned at least 50 percent of their compensation from commissions. In September 2011, the state repealed its overtime exemption rules for a variety of employees, such as executive, administrative, professional and outside sales employees, and replaced them by reference with the analogous federal exemptions set forth in 29 C.F.R. §541 (except as those federal regulations applied to state government employees). This change was meant to be an employer-friendly move, making the once more protective New Jersey regulations in line with the federal government's 2004 revisions that are viewed as less employee-friendly. However, when the NJDOL adopted the employer-friendly federal language, it mistakenly failed to adopt the analogous federal commissioned- sales exemption language.1
The Resulting Limbo
As a result of this oversight, New Jersey's prior overtime exemption for inside sales people was deleted, and therefore, current New Jersey law can be read to require employers to pay inside sales employees overtime — even though federal wage and hour law does not require it. This change, while unintended, now arguably affects many retail establishments within this state. Although the state plans to fix this soon, and state enforcement may be lax, we cannot say with certainty that the state, plaintiffs' lawyers, or the judiciary will read the new regulation in a way to preserve the overtime exemption while the state decides to act. As a consequence, any employer that may have relied upon New Jersey's inside sales exemption in the past should reexamine its overtime policies, and contact its attorney to formulate a proper plan moving forward.
Footnotes
1. The federal commissioned-sales exemption is instead found at 29 U.S.C. § 207(i), and the regulatory scheme found at 29 C.F.R. §§779.410, et seq.
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