A California Court has held that a group of recruiters qualified for California’s commissioned salesperson exemption.

Here’s how the court described what these recruiters did to earn their keep:

Appellants’ primary job duty was to recruit “candidates” for employer “clients.” Surrex’s clients would place “job orders” with Surrex and appellants would search for potential candidates to fill the job orders. Appellants would use various resources to find candidates, including an internal database that Surrex maintained and various “on-line job boards.” Appellants would then attempt to convince both the candidate and the client that the placement of the candidate with the client was a proper fit.

The recruiters sued their employer, arguing that they were owed unpaid overtime. However, these particular employees were subject to IWC Wage Order 7, and under that Order, you don’t get overtime if you’re a bona fide “commissioned salesperson.” The company argued that these recruiters were commissioned salespersons, and the trial court agreed, throwing the claim out. The Court of Appeals has now affirmed that result.

Under California law, you don’t qualify for the commissioned salesperson from overtime unless – get this – you’re a salesperson and you get paid on commission.

The court held that these recruiters were indeed principally engaged in selling a service by scrounging up job candidates and convincing them to come work for the company’s clients:

appellants’ job, reduced to its essence, was to offer a candidate employee’s services to a client in exchange for a payment of money from the client to Surrex. Offering a candidate’s employment services in exchange for money meets the ordinary definition of the word “sell”… Further, Surrex presented evidence and testimony that appellants engaged in what is commonly thought of as sales-related activity — that is, they attempted “to persuade or influence [clients] to a course of action or to the acceptance of something.” [Citation]. Finally, it is undisputed that Surrex did not obtain any revenue unless and until an employer client selected a candidate proffered by a consulting services member. Thus, it was only upon the successful placement of a candidate that Surrex recorded a sale, and that a Surrex client became a paying client.

The court nixed the recruiter’s counter-argument that tasks such as trolling the Internet for potential job candidates, reviewing resumes, etc., shouldn’t count as time spent “selling”:

This argument perceives the word sales in a vacuum contrary to the job description of any salesman. The whole point of these activities, including online search for candidates, resume reviews, unsolicited (cold) calls, etc., are the essential prerequisites necessary to accomplishing the sale.

Finally, the court concluded that these recruiters were indeed paid a bona fide commission. The recruiters received a percentage of the money paid by the company’s clients for candidates – but this percentage was then run through a mathematical formula based on the company’s “adjusted gross profit” relative to the sale. In essence, the lower the company’s costs associated with the sale, the higher a percentage of that sale the recruiter would receive as payment. The recruiters objected, claiming that this couldn’t qualify as a bona fide commission system because it wasn’t a “straight” commission and it was “too complex.” The court rejected this argument, stating in essence that nothing in earlier California decisions required a straight commission system in all circumstances.

The case is Muldrow v. Surrex Solutions Corp.

Image: graur razvan ionut, freedigitalphotos.net