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Is an Insurance Agent Exempt from Overtime?

In the United States, the federal Fair Labor Standards Act, or FLSA, protects workers from unfair labor practices by requiring that most workers be paid at least minimum wage and that most workers be paid overtime for time worked over 40 hours during a workweek. Overtime must be paid at the rate of one and one-held the worker’s regular hourly wage.

Some employees, however, are exempt from the overtime pay requirement found in the FLSA. Because employers often claim an exemption for an employee who is not really entitled to the exemption, it is wise for workers to have at least a basic understanding of when an exemption applies and when it does not. For example, is an insurance agent exempt from overtime? As is often the case, the answer is “maybe.”

The FLSA requires a covered employer to pay an employee overtime unless the employee qualifies as an “exempt” employee under the FLSA. Though there are numerous categories of exemptions, some of the most common include:

  • Commissioned sales employees
  • Computer professional
  • Drivers, driver's helpers, loaders, and mechanics
  • Farm workers
  • Executive, administrative, professional, and outside sales employees

However, an employee is not automatically exempt just because an employer places the employee under one of these categories. Within each category there are tests that an employee must pass to be considered exempt using that category. As a result, determining if any employee is exempt is often dependent on the specific facts and circumstances.

The issue of whether or not an insurance agent is exempt from the overtime pay requirement found in the FLSA has been addressed in an “Opinion Letter” by the Wage and Hour Division (WHD) of the U.S. Department of Labor, the federal agency responsible for enforcing the FLSA. An Opinion Letter is a formal response to a request by an employer regarding an issue that needs clarifying. It is not a court decision. Instead, the WHD considers the specific facts presented in the scenario given by the employer and provides a response that tells the employer how the FLSA would apply to the scenario outlined by the employer. For instance, an employer asked the WHD to consider whether or not insurance agents working for the employer would qualify as exempt from overtime using the outside sales or administrative exemptions.

Given the facts presented to the WHD by the employer, one group of insurance agents would likely qualify under the “outside sales” exemption while another groups would likely qualify under the “administrative” exemption. The outside sales exemption was based, in this case, on three primary facts:

1. The agents met the “sales” requirement because they sold insurance

2. They primarily sold directly to clients outside of the office, meeting the “outside” requirement.

3. Any work they did inside the office was “incidental” to their outside sales activities.

The administrative exemption was based primarily on the fact that the agent’s job descriptions included the “exercise of discretion and independent judgment with respect to matters of significance.”

Ultimately, the question of whether an insurance agent qualifies as exempt will depend on duties and responsibilities involved in the agent’s job. If you are unsure, it is always best to consult with an experienced Conshohocken, Pennsylvania employment law attorney to avoid a costly mistake. Contact the employment law attorneys at Curley & Rothman, LLC by calling 610-834-8819 today to schedule your free consultation.