‘Outside sales’ inside Costco: classifying a representative sample

The California Court of Appeal recently held that whether an employee at a fixed site not owned or leased by the employer is subject to the outside salesperson exemption is determined by the extent to which the employer maintains control or supervision over the employee’s hours and working conditions.

Background

Warehouse Demo Services, Inc. (WDS)—the in-house product demonstration company for Costco—hires people to perform demonstrations of products at Costco’s warehouses. The demonstrators are classified as “part-time, nonexempt, hourly employees eligible for overtime pay according to state and federal law.” They’re assigned to a single Costco and don’t move from warehouse to warehouse.

WDS collects floor space rent from its vendors who want demonstrations of their products. It gives payments to Costco every month. It doesn’t lease any space from Costco but maintains office space within each location where it has demonstrations. On average, it assigns 22 to 25 demonstrators, one event manager, and two shift supervisors to each Costco location. Event managers are salaried employees and handle managerial tasks such as scheduling demonstrators, setting sales quotas, and handling paperwork. Shift supervisors help cover demonstrations and help with paperwork.

In the case before the court, a demonstrator was employed by WDS for five years. At the start of her employment, she received a booklet from the company titled, “Demonstrator Handbook.” Her stated job summary was to “perform product demonstrations and drive sales with friendly member interaction, enthusiastic product information, and sample availability.”