Inside Sales Misclassification & What to Do If You Suspect Your Employer Owes You Backpay

The promise of commissions, incentives, and flexible hours can make inside sales jobs attractive. But behind those offers, some employers classify sales employees as exempt from overtime protections when the law may not allow it. This practice — called misclassification — can leave workers without the pay they are entitled to under California and federal law.

If you work in inside sales and believe you are misclassified, you may have a right to recover significant backpay. Understanding how California and federal law apply is the first step in protecting yourself.

What Does “Inside Sales Misclassification” Mean?

Under both the Fair Labor Standards Act (FLSA) and California labor laws, certain employees are exempt from overtime pay requirements. Employers sometimes argue that salespeople fall into this category. But the rules are strict, and not every sales role qualifies.

Outside sales employees — those who primarily spend their time making sales calls or meeting customers away from the office — often fall within a recognized exemption. Inside sales employees, however, generally work from the employer’s office, call centers, or even remotely, selling by phone, email, or online platforms. For these workers, classification as “exempt” is more complex and often misapplied.

A misclassification occurs when an employer incorrectly labels an inside sales worker as exempt from overtime. The result: employees can work long hours without overtime pay, even though the law says they should receive it.

California Law on Inside Sales Employees

California provides some of the most protective wage and hour laws in the nation.

Here are the key standards:

• Non-Exempt by Default. Inside sales employees are typically considered non-exempt. That means they are entitled to minimum wage, overtime for hours worked over eight in a day or 40 in a week, and meal and rest breaks.
• The Commissioned Sales Exemption in California. Employers sometimes argue that the “commissioned sales exemption” applies. But in California, this exemption is limited. It only applies when the employee earns more than 1.5 times the state minimum wage, and more than half of their compensation comes from commissions.
• Job Duties Still Matter. Simply paying an employee through commissions does not automatically make them exempt. Courts look at the actual day-to-day job duties, not just the job title.

In short, if you are an inside sales worker who spends most of your time in an office, call center, or home office making sales remotely, there is a strong chance California law considers you non-exempt.

Federal Law on Commissioned Inside Sales Employees

The federal Fair Labor Standards Act also recognizes a limited exemption for commissioned retail or service employees.

Under Section 7(i) of the FLSA, an inside sales worker may be exempt from overtime if:

• The employee works at a retail or service establishment.
• Their regular rate of pay is more than 1.5 times the federal minimum wage for every hour worked in weeks when overtime is worked.
• More than half of their earnings come from commissions on goods or services.

Unlike California law, the FLSA exemption does not include the same daily overtime rules and primarily applies to traditional retail settings. Because California law is generally more protective, employees in the state typically benefit from whichever rule provides greater rights.

Why Misclassification Happens

Employers may misclassify inside sales employees for several reasons. Sometimes it is intentional; other times it stems from misunderstanding the law.

Common motivations include:

• Cost Savings. Avoiding overtime, double-time, and meal/rest break penalties can save employers money.
• Simplified Payroll. Employers may find it easier to pay employees on a straight commission or salary basis.
• Industry Norms. In some sales-driven industries, misclassification has become widespread, with businesses following competitors’ practices even when they do not comply with the law.

Regardless of the reason, the law places the burden on employers to properly classify their workers.

Signs You May Be Misclassified

It can be difficult for employees to determine on their own whether they are properly classified.

However, certain warning signs suggest misclassification:

• You are paid only on commission, with no hourly rate or overtime.
• You regularly work more than eight hours a day or 40 hours a week without overtime pay.
• You are expected to remain at your desk, office, or home workstation while making sales.
• You do not receive proper meals and rest breaks.
• Your employer refers to you as “salaried,” but your job duties are primarily inside sales.

If any of these apply to you, it may be time to look closer at your classification.

What Backpay Could Be Owed

If you have been misclassified, you may be entitled to significant financial recovery.

Possible claims include:

• Unpaid Overtime. Time-and-a-half for hours worked beyond eight per day or 40 per week, and double-time for hours beyond 12 in a day.
• Unpaid Minimum Wages. If commissions did not bring your pay above the required minimum.
• Meal & Rest Break Premiums. One additional hour of pay for each missed break.
• Interest & Penalties. Additional sums that California law requires employers to pay for late or unpaid wages.
• Attorneys’ Fees & Costs: In many wage claims, the employer is required to cover the worker’s legal fees if the claim succeeds.

Depending on how long the misclassification has occurred, claims can reach tens of thousands of dollars or more.

Steps to Take if You Suspect Misclassification

If you believe your employer may have misclassified your inside sales role, consider these steps:

1. Review Your Pay Records. Gather pay stubs, commission statements, and schedules. Look at how you were paid compared to the hours you worked.
2. Document Your Work Duties. Courts and agencies look at what you actually do day-to-day. Keep notes about your work environment, sales activities, and time spent on different tasks.
3. Understand the Risks of Going It Alone. Employers may resist paying back wages, and misclassification claims can be complex. Having legal representation often makes a critical difference.
4. Consult with an Employment Attorney. A lawyer familiar with California wage and hour law can evaluate your classification, explain your rights, and help pursue backpay. We offer consultations to help workers assess their situation.

Why Legal Representation Matters

Employers typically have attorneys advising them, and they may push back hard against claims. Employment attorneys can level the playing field.

They can:

• Analyze whether the commissioned sales exemption applies to your role.
• Calculate how much backpay may be owed.
• Represent you in negotiations with your employer or in court.
• Protect you against retaliation, which is unlawful under California law.

Having an advocate means you do not have to navigate the process alone — and that you have someone firmly in your corner.

We Can Help Protect Your Right to Fair Pay

Inside sales misclassification is more common than many workers realize. If you are classified as exempt but spend your workdays selling from an office or home workstation, your employer may owe you significant backpay.

California law was designed to protect employees in exactly these situations. By reviewing your classification, documenting your duties, and speaking with an attorney, you can take steps toward recovering the wages you deserve.