Concerning the Myth that Low-speed Car Collisions Cannot Cause Injury

Introduction

There is a public myth that all persons bringing a claim or suit in response to a low-impact collision must be faking because something so minor cannot possibly cause serious injury.  This is a myth because it has become a popular opinion, but also because it is not true – in fact, nothing could be further from the truth.  The science shows that whether an vehicle occupant suffers injury depends on a variety of factors including prior susceptibility to injury because of age or prior degenerative issues, the actual speed of the vehicles, the weight of the vehicles, the angle of impact, and whether the occupant was anticipating the impact.[1]  While it is true that some people walk unscathed from serious roll-over collisions, it is equally true that some people suffer serious injury as the result of what appears to be a relatively minor impact.[2]  No two collisions are the same, and no two vehicle occupants are the same, and the probability of injury given a set of parameters must be considered and determined on a case-by-case basis.

However, this determination requires actual critical analysis.  It is easy to just make assumptions when we make our decisions.  The assumptions that most people make regarding low-impact collisions are wrong and are shaped by a variety of factors.

Insurer efforts designed to discourage lawsuits

Global insurance companies have an interest in externalizing costs and shirking accountability in order to maximize profits.[3]  To that end, they have spent billions of dollars during the past five decades peddling the myths that there are too many lawsuits, and that the nation is full of complainers looking for a hand-out.[4]  By and large, nothing could be further from the truth.  Motivating these efforts is the critical fact that these insurance companies do not want to be held accountable for the ways they pass the cost of doing business onto the public because that would affect profits – and more importantly, executive bonuses.  The primary and most direct method that members of the public have at their disposal to hold these giants responsible is through the civil justice system.

For over five decades, these leviathans have flooded the local and national news by paying media outlets to plant false and misleading “human-interest” stories about frivolous lawsuits.[5]  These conglomerates have spent billions of dollars vilifying trial attorneys as greedy, amoral opportunists looking to make a quick buck on frivolous claims. And the efforts by the insurance industry to discredit the civil justice system have one aim – to reduce payments on claims, legitimate or otherwise.[6] 

Do you honestly think “You’re in good hands with Allstate” when Allstate increases profits by denying or refusing to pay full value for legitimate claims?[7] 

Do you really believe that “like a good neighbor, State Farm is there” when State Farm’s entire business model is based on making money by collecting as much for premiums as they can while simultaneously paying out as little as possible on claims, legitimate or otherwise?[8] 

Do you really think that the trial attorney who has spent $50,000 in his own money in case costs, not to mention his time and office costs, is some opportunist who is willing to risk it all on a “frivolous claim”?

Do you really think that the civil justice system itself does not have a mechanism to deal with frivolous lawsuits prior to the time they are ripe for jury trial?

Do you really believe the myth that lawsuits cause your premiums to go up?  Look at the data.  In all states where various types of damage caps were put in place, premiums did not decreased.  The only thing that happened was insurance companies posted larger profit margins and executives got bigger bonuses.  Insurance companies never pass savings along to the consumer.[9] 

Did you know every major insurer is willing to pay $100,000 in legal fees to defend its refusal to pay a $15,000 claim because an army of bean-counters have created an algorithm that shows that over a given period of time it is cheaper to discourage claims by refusing to pay them, legitimate or not, rather than just pay them?

Do you really think it is in your interest to oppose a private citizen’s use of the civil justice system to hold unscrupulous insurance companies accountable for what they owe under a policy?  Unless you are an executive, board member, or a major stakeholder in one of these entities, why would you think it is your role to act as a gate-keeper to prevent private citizens from getting redress for the harms these insurers promised to pay for? 

Profits are the stated purpose of these organizations, and there is nothing wrong with that.  Capitalism may be the greatest force for good that any society in the history of humanity has ever known.  It has led to improved conditions, increased life-expectancy, and increased literacy across the planet.  America is great in large measure because it is a nation of shopkeepers, of small and mid-sized business owners and professionals dedicated to bringing a good or service to market.  Most of them do this out of love for family, profession, and community – as well as profits. 

But this is a much different sort of capitalism than the neo-capitalism practiced by the global insurance giants, where profits become the sole and exclusive purpose of the organization.  These are entities upon which we all depend for coverage in case of loss. Where short-term profits are the only motive directing the conduct of these companies, there is great danger that injustice and harm to the public will result.  Insurance companies have been granted a legal monopoly over the market. All drivers on the roadways are legally required to purchase auto insurance in case of loss. In exchange for this market monopoly, the insurance industry accepted a public trust to pay for harm when there is an accident. This was designed to prevent private citizens from extreme hardship in case of loss, and to lessen the overload on public resources. If the desire for short-term profits outweighs the long-term duty of care, the public is forced to pay for loss while executives and shareholders keep the premiums. 

Public perception regarding lawsuits has been definitively and diligently shaped in the negative during the past fifty years by an industry with an unlimited supply of money, whose primary aim is to reduce accountability by externalizing the cost of doing business.  This enemy of the commonwealth has been poisoning the well of public opinion for so long that the people are generally unaware their water has been poisoned.  Unfortunately, the “frivolous lawsuit” bias has taken root and has become almost hard-wired into the collective consciousness of the average American.

Modern bumpers are designed to hide the force of impact

With respect to advocating for the legitimacy of low-impact collisions, compounding the basic bias against lawsuits is the fact that plastic automobile bumpers are intentionally designed to hide the force of an impact and minimize cosmetic damage to a vehicle.[10] It is common knowledge to automotive design engineers, government regulators, and others in the industry that bumpers are specifically designed to absorb crash energy without showing any damage to the bumper itself during a low-speed impact.[11]

It is very difficult to argue an impact caused injury where there is no visible evidence of impact. This is why the insurance industry actively lobbied governments and automobile bumper designers in the 1970’s and 1980’s to design bumpers that do not show damage when there is a low-speed impact. The rationale given was that this would save the consumer billions of dollars a year in property damage repairs that resulted from low-speed collisions. What was not mentioned was that the insurance industry itself was required to pay for repairs under the standard auto insurance policy terms, and therefore stood to make enormous profits when the bumpers were redesigned. When bumpers were redesigned, this seemingly minor victory allowed the insurance industry to decreased not only the cost of payout on millions of property damage claims, it also provided a basis to push, during the next half-century, for decreased payouts on bodily injury claims.

When combined with the “frivolous lawsuit” bias, the bumper design bias compounded the public’s belief that certain types of impacts cannot cause injury.  While this assumption is scientifically unsound and disprovable, it is nevertheless prevalent, and must be dealt with by every advocate who faces it.

Heuristics and pre-conceived bias

A “heuristic” is a mental short-cut that allows people to rely on assumptions to make decisions quickly and efficiently.[12]  It is a mechanism hard-wired into the operations of our minds.  It is useful for making decisions about things like what to wear, what to eat, which route to take home from work, and whether to trust a co-worker with a task.  There is a wealth of research on heuristics.  Unfortunately, in addition to being useful rules of thumb, heuristics can also contribute to prejudice, stereotypes, and biased thinking.  Heuristics are an excellent tool for some tasks and a serious impediment for others.

In his excellent book, “Thinking, Fast and Slow,” Daniel Kahneman details the difference between what he calls “System 1” thinking and “System 2” thinking. System 1 is that automatic part of the brain that adopts mental shortcuts to make decisions that are either basic or exigent. System 2 is that slow and deliberative part of the brain that must use effort and attention to get to its decision. A study of System 1 thinking shows it is vulnerable to mistakes in the way information is processed. The processing mistakes are all based on the fallacy of assuming that current conditions are the same as similar past conditions, and therefore the two must be the same. These assumption based processing mistakes, or biases, take several forms such as availability of recent information in the memory, and substitution of a more simple problem for a more complex one. In short, there are some problems that mandate deliberative and logical System 2 thinking, and for which assumption based System 1 thinking are entirely inadequate.

As things sit, global insurance interests have successfully implanted a bias against lawsuits and trial attorneys into the public mind. They have done this by tapping into the latent resentment over the erosion of social values and a growing discrepancy in wealth equality. This powerful interest group has convinced us that the world is full of bad people looking for a handout.  Ironically, the very industry that contributed to an erosion of social values and a growing discrepancy in wealth inequality by putting short-term profits ahead of its’ public trust is now telling us that the problem is people who are looking for a handout. How convenient. Insurance companies have spent decades of effort and billions of dollars successfully convincing us that low-impact collisions cannot cause injury, that they are friendly, quirky, funny, but harmless entities whose sole interest is protecting our interests, and that the world is full of bad people who just want something for nothing.

Ideas matter.  Unfortunately, the misplaced biases against lawsuits, trial attorneys, and low impact collisions are bad ideas that hurt people.  These biases make it extremely difficult to advocate on behalf of people who are legitimately injured as the result of low speed car crashes.  These biases allow the insurance industry to escape accountability for payment to those injured by the fault of another. Many, many people suffer from chronic pain for which they do not have a pathway to relief because of the insurance industry’s deliberate poisoning of public opinion, and because of the blind spots in our ways of thinking.

Conclusion

The purpose of this written piece is to say something that needs to be said – we must think for ourselves.  It is hard work and it requires us to develop new skills and to forego assumptions that we rely on to make us feel safe.  It is scary to exercise independent thought – we must do it anyway.  It is scary to examine our assumptions – we must do it anyway. Thinking for ourselves may lead us to new associations of people and away from old ones – we must do it anyway.  Thinking for ourselves requires us to explore new possibilities when it comes to beliefs, places, cultures, and possibilities, which is not for the faint of heart – we must do it anyway.  It requires us to question our sense of identity – we must do it anyway.  It ultimately leads to the examination of deep questions of meaning and purpose – we must do it anyway.

Do not be a prisoner to convention.  Do not accept appearance as reality.  Look beneath the surface.  Do not accept the claims of insurance elites who are seeking to use your pain as a weapon against innocent people that are suffering and need relief.  And most importantly, do not allow you to fool you.  Use the great power of your faith, your curiosity, your training, and your intellect to guide you in an exploration of the truth that will enlighten both you and the world around you.  Bring something new into the world – your own hard-fought individual experience and point of view. 

The alternative is easy.  It means not questioning.  It means not disturbing the status quo.  It means relying on “System 1” thinking for the most important decisions we make. But it also means accepting a life lived in a mental cloister of safety and security and not in the uncertain and exciting field of intellectual exploration and adventure. 

This is the issue of faith.  None of us can escape the issue of faith.  Either we have faith in the proposition that there is a real-world filled with objective facts, meanings, and values that we can discover through the exercise of independent thought, or we adopt conventional assumptions which hide us from doubt, from darkness, and from the awful thought that reality is ultimately relative, it proceeds from nothing, means nothing, and passes away without consequence.  Faith is at the crux of life.  It takes faith to explore.  It takes faith to exercise courage.  And it takes faith to think for yourself.

So, have a little faith and think for yourself the next time a dishonest insurance defense attorney tells you that a low-impact collision cannot cause injury, or you see a news story telling you that there are too many frivolous lawsuits, or you see some politician telling you the real problem is “those people,” the ones that are not like us.


[1] See, Hallmark v. Eldridge, 124 Nev. 492, 502, 503 (2008) (biomechnical opinion speculative and unreliable where it fails to consider the vehicles starting positions, speeds at impact, length of time in contact, or angle of impact, and biomechanical expert failed to physically examine injured party or consider past medical history); see also, Happer et al., Practical Analysis Methodology for Low Speed Vehicle Collisions Involving Vehicles with Modern Bumper Systems, (SAE Technical Paper Series 2003-01-0492).

[2] See generally, Augenstein et al., Characteristics of Crashes that Increase the Risk of Serious Injuries (Association for the Advancement of Automotive Medicine, 47th Annual Proceedings September 22-24, 2003).

[3] https://philosophia.uncg.edu/phi361-matteson/module-4-business-and-the-environment/externalities-and-the-environment/ (last checked Feb. 15, 2020).

[4] http://www.tortdeform.com/archives/2006/09/the_myth_of_the_frivolous_laws.html (last checked Feb. 15, 2020).

[5][5] http://www.centerjd.org/misleading-anecdotes-about-lawsuits (last checked Feb. 15, 2020).

[6] Croft and Freeman, Correlating Crash Severity with Injury Risk, Injury Severity, and Long-term Symptoms in Low Velocity Motor Vehicle Collisions, RA317, para. 1 (Med Sci Monit. Oct. 2005).

[7] David J. Berardinelli, From Good Hands to Boxing Gloves: The Dark Side of Insurance (2008).

[8] State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408, 419-420 (2002) (“we must acknowledge that State Farm’s handling of the claims against the Campbells merits no praise.  The trial court found that State Farm’s employees altered the company’s records to make Campbell appear less culpable. . . [.]  ‘State Farm’s decision to take the case to trial was part of a national scheme to meet corporate fiscal goals by capping payouts on claims company wide.’ ‘[t]his pattern of claims adjustment under the PP&R program was not a local anomaly, but was a consistent, nationwide feature of State Farm’s business operations orchestrated from the highest levels of corporate management.’”).

[9] https://www.decof.com/documents/the-truth-about-medical-malpractice-insurers.pdf (last checked Feb. 15, 2020).

[10] National Highway Traffic and Safety Administration, Bumper Q&A’s, Q. 1, Q. 2 & Q. 11 (2015) (Q. 1: “When a low speed collision occurs, the bumper system [is designed to] prevent or reduce damage to the car.”  Q. 2: “The car bumper is designed to prevent or reduce physical damage to the front and rear ends of passenger motor vehicles in low-speed collisions.”  “[Bumpers] are not a safety feature intended to prevent or mitigate injury severity to occupants in passenger cars.”  and Q. 11: “[There is no way] to determine how fast a car was going during a rear end crash based on the damaged bumper(s).”)

[11] Id, see also, https://sparebumper.com/everybody-know-bumpers/ (last checked February 15, 20120). 

[12] https://en.wikipedia.org/wiki/Heuristic (last checked Feb. 15, 2020).

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Issues with Business Interruption Coverage in Case of Loss

Many insurers issue a business owner’s policy in case of accidental loss. The policy generally provides a number of different types of coverage, including business interruption coverage.  Business interruption coverage provides that, that in case of a loss that affects business income, the insurer will pay for the actual loss sustained due to the necessary suspension of operations during the period of restoration. Unfortunately, the calculation used to determine coverage often allows insurers to avoid paying the full amount of actual lost business income.

If you are a business owner that has suffered a loss, such as a fire, we invite you to Contact Us to speak with an attorney about your situation and ensure that you receive all of the reimbursement you are entitled to under your policy.

The Formula Used by the Insurance Industry

The standard used by the insurance industry to calculate business income loss is designed to calculate the loss in net income/lost profits.  The insurer collects the gross receipts over a given historical period, such as the prior twelve (12) months of operations.  It then subtracts the revenues actually earned during the period in question.  This is known as lost revenue.  The insurer then subtracts the cost of goods sold from the lost revenue.  What is left is the net income/profit that the business would have earned if the loss had not occurred.

The Formula Used by the Legal Profession

While insurers use their own formula to determine their reimbursement amount, that formula typically does not align exactly with the language used to define “business income” within the policy itself.  The text of one standard provision reads, “Business Income means the: (a) Net Income (Net Profit or Loss before income tax) that would have been earned or incurred if no direct physical loss or physical damage had occurred; and (b) Continuing normal operating expenses incurred, including payroll.”  A plain reading of this language suggests that in time of suspended operations, a business is entitled to payment from an insurer for both the net income lost, plus normal operating expenses actually incurred.

The interpretation of this policy language was at issue in Polymer Plastics Corp. v. Hartford Cas. Ins. Co.[1] In Polymer Plastics, the plaintiff, a business that sustained a loss to its facility because of storm damage, argued that it was entitled to “continuing normal operating expenses” in addition to “net income” as per the express language within the policy.[2] The court found this interpretation of the policy was not supported because the policy states that the insurer will only pay for the loss of business income sustained due to the suspension of operations caused by the loss.[3]  The court essentially conflated the common definition of the phrase “loss of business income” with the policy definition of the term “business income” to come to the desired result, despite the obvious fact that “business income” was expressly defined within the policy and there was no rational support for the contention that the parties intended for two definitions of the same term to co-exist simultaneously.

The Court then articulated a formula for calculating business interruption loss that is slightly different that the one used by the insurance industry.  Specifically, the court stated that the “formula for ‘actual loss of business income’. . . is: Net Income (that would have been earned/incurred) plus Continuing Normal Operating Expenses (actually incurred) minus Gross Income (actually earned).”[4] Of note, the Ninth Circuit Court of Appeals upheld the Nevada District Court’s decision in an unpublished opinion.[5]

By way of example, let’s assume that Business A suffered a fire in one of its facilities and, while it had a historic monthly income of $100,000 per month, during the suspension of operations it has only been able to generate $50,000 per month.  Let’s also assume that Business A has a cost of goods sold that equals seventy percent (70%) of gross income.

Using the district court’s formulation of the policy provisions to calculate business interruption loss, Business A’s net income would have been $30,000 ($100,000 – $70,000 = $30,000), which added to the normal operating expenses actually incurred of $35,000 ($50,000 x .7 = $35,000), minus the gross income actually earned of $50,000, totals a lost business income of $15,000 ($65,000 – $50,000 = $15,000).  Of note, while the Federal district court framed the business interruption loss formula differently than it is commonly framed by the insurance industry, both formulas achieve the same result.

Tactics Used by the Insurance Industry to Reduce Your Business Interruption Payments

Application of the business interruption loss formula is simple in theory, but in practice, insurers are in the business of making money, and one of the ways they do this is by adjusting the value of the claim downward.  The insurance adjuster may calculate historic monthly income by considering the average monthly income over an extended period of time in order to reduce the historic average monthly gross revenues, even though it is plain from the balance sheet that there has been significant recent growth.

For example, six months prior to the loss, Business A may have grown from $100,000 in gross monthly revenue to $150,000 in gross monthly revenue through acquisition of an additional store.  However, if the insurance adjuster calculates the average gross monthly revenue using the prior twelve (12) months, the average gross monthly income will total $125,000, not $150,000.  This will reduce the amount of lost profit a business owner would otherwise be entitled to under the policy.

Alternatively, the insurer may reduce the amount owed to a business owner under the terms of the policy by inflating the cost of goods sold so that the monthly net income that would have been generated is diminished.  This is done through artificial inflation of payroll, utilities, taxes, and other costs associated with the provision of goods or services by the business, or by failing to properly account for extra expenses occasioned by the loss.  Unfortunately, in practice most insurers will not show the math they used to calculate business interruption loss and expect the business owner to blindly accept that the insurer paid what was owed.

Tactics Used by the Insurance Industry to Increase Their Own Profits

Further complicating business interruption loss is the fact that a business can suffer a cash-crunch as revenues plummet because of contracted operations caused by the loss.  Insurers oftentimes sit on payments they know are due and owing until the end of the restoration period, knowing immediate payment is required for continued liquidity and viability of the business.  They also delay restoration of normal operations by failing to timely authorize payments to contractors for repairs, or to timely authorize payment to replace equipment.  Again, insurance companies are in the business of making money, and one of the ways they do that is by delaying payment as long as possible on as many claims as possible so that they can reap the time-benefit of invested premiums.  This can result in significant permanent damage to a business and can even render it insolvent, yet insurers will not acknowledge the decreased value of the business caused by the delay in payment, and will maintain that they are only required to cover the net income lost during the period of restoration.


If you have suffered a covered loss for which you are entitled to business interruption payments, it is very difficult to know whether an insurer is correctly calculating your business income loss.  Chances are, they are not, and most of the time they will not show you their calculations.  Often, on your own, you may be limited in your ability to prevent your insurer, who has agreed to protect your interests, from instead harming you by putting their own interests first.

If you are a business owner that has suffered a loss, such as a fire, we invite you to Contact Us and speak with an experienced attorney about your situation.  Doing so can make the difference between the ultimate viability or insolvency of your business.


[1] 2006 U.S. Dist. LEXIS 103077 (D. Nev. Sept. 26, 2006).
[2] Polymer Plastics, 2006 U.S. Dist. LEXIS 103077 at *17.
[3] Id.
[4] Id. at 22.
[5] Polymer Plastics Corp. v. Hartford Cas. Ins. Co., No. 08-17497 (9th Cir. 2010).

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What is the Deadline for Receipt of Final Pay on Termination or Resignation?

Whether by involuntary termination, or by voluntary resignation, Nevada law establishes strict rules for payment of final wages to employees upon separation from employment. Employers are required to make payment of all wages owed to an employee within certain deadlines, depending on whether the separation was voluntary or involuntary, and failure to do so may entitle the employee to recover substantial “waiting time” wages, in addition to the unpaid final wages.[1]

If you resigned or were terminated and did not immediately receive your final pay in full, we encourage you to Contact Us to meet with an attorney and discuss your situation.

Involuntary Termination

Whenever an employer discharges an employee, the wages and compensation earned and unpaid at the time of such discharge shall become due and payable immediately.[2] If an employer fails to make immediate payment of all compensation owed to an employee at the time of termination, the employee is entitled to additional waiting time wages in the amount of the employee’s regular daily rate of pay for each day from the date of termination until receipt in full of the unpaid compensation, or for 30 days, whichever is less.[3]

Although the unpaid wages are due immediately, Nevada law provides a safe harbor period for the employer to tender payment in full. So long as the employer makes payment within three days after the date of termination, the employer is not subject to payment of any additional waiting time wages to the employee.[4] However, if payment in full is not made within the safe harbor period, waiting time wages will be owed for each day final wages remain unpaid, beginning with the date of the termination.

The final pay requirements and waiting time provisions of Nevada law apply only to private employers, and are inapplicable in the case of separation from employment with a state or Federal employer.[5]

Voluntary Resignation

When an employee voluntarily resigns from employment, the wages and compensation earned and unpaid at the time of the employee’s resignation must be paid no later than the next regularly occurring pay day, or seven days after the employee resigns, whichever is earlier.[6] If an employer fails to make payment of all wages owed to an employee who has resigned on the date such wages are due, the employee is entitled to additional waiting time wages in the amount of the employee’s regular daily rate of pay for each day from the date the wages were due until receipt in full of the unpaid compensation, or for 30 days, whichever is less.[7]

The final pay requirements and waiting time provisions of Nevada law apply only to private employers, and are inapplicable in the case of separation from employment with a state or Federal employer.[8]

Interaction with Other Wage and Hour Laws

Nevada law requires that an employer pay all wages and compensation owed to an employee who is terminated or resigns within certain deadlines, or be liable for payment of additional waiting time wages to the separated employee.[9] As such, employees who are owed unpaid wages for off-the-clock work, failure to pay at least the minimum wage for all hours worked, or failure to pay wages at the applicable overtime rate where required, or who are owed any other wages or compensation not included in the final paycheck, are entitled to recover waiting time wages even in cases where the final paycheck is received within the deadlines set forth by statute.


If you resigned or were terminated and did not immediately receive your final pay in full, we encourage you to Contact Us to meet with an attorney and discuss your situation.


[1] Neville v. Eighth Judicial Dist. Court of Nev., 406 P.3d 499, 504 (Nev. 2017)(holding that NRS 608.140 implies the existence of a private right of action to enforce, inter alia, NRS 608.020-608.050).
[2] NRS 608.020.
[3] NRS 608.040(1).
[4] NRS 608.040(1)(a).
[5] AGO 154 (7-8-1920); AGO 81-9 (9-24-1981).
[6] NRS 608.030.
[7] Fn. 3, supra.
[8] Fn. 5, supra.
[9] See NRS 608.020, et seq.

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When is a Sales Employee Exempt from Overtime?

The Fair Labor Standards Act (“FLSA”) is a Federal law that requires employees be paid overtime for all hours worked in excess of 40 in a workweek. Certain sales employees may be exempt from the overtime provisions of the FLSA if they are subject to the “outside sales exemption”[1] or the “retail service establishment exemption.”[2] If you believe you may be misclassified as an overtime exempt, salaried employee, we encourage you to Contact Us to meet with an attorney and discuss your situation.

The Outside Sales Exemption

The overtime requirements of the FLSA do not apply to, “. . . any employee employed . . . in the capacity of outside salesman. . . .”[3] In order to be considered employed “in the capacity of outside salesman” an employee must satisfy ALL of the following conditions:

  1. The employee’s primary duty must be making sales or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer;[4] and
  2. the employee must be customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty.[5]
What Does “Primary Duty” Mean?

A task performed by an employee is considered that employee’s “primary duty” for the purposes of exemption from FLSA overtime requirements when it is the, “. . . principal, main, major or most important duty that the employee performs.”[6] As a general rule, if more than 50% of the hours worked by an employee in any given workweek are spent performing exempt, outside salesperson tasks, then that employee will be considered overtime exempt.[7]

Where is the Employer’s “Place of Business?”

Outside sales means the process of soliciting at the customer’s place of business or, if selling door-to-door, at the customer’s home. Outside sales excludes sales made by mail, telephone, or the internet. Any fixed site, whether home or office, used by a salesperson as a headquarters or for telephonic solicitation of sales is considered one of the employer’s places of business, regardless of whether the employer actually owns or rents the property.[8] So even a salesperson that has never been to the employer’s brick and mortar location, but makes telephonic sales entirely from their home, would not be considered an outside salesperson under the FLSA.

Is There a Minimum Salary Requirement for Exempt Outside Salespersons?

Of note, the minimum salary requirements that apply to professional, executive, and administrative employees who are exempt from overtime under the FLSA, discussed at When is a Non-Sales Employee Exempt from Overtime?, do not apply to outside salespersons.[9] There is no minimum salary required to be classified as an exempt outside salesperson, so long as all of the other requirements are met.

The Retail Service Establishment Exemption

The FLSA provides for an exemption from its overtime requirements for inside salespersons who meet certain requirements. In order for an inside salesperson to be considered overtime exempt under the FLSA, the employee must be employed by a retail or service establishment; AND must be paid (when computed on an hourly basis) more than one and one-half times the applicable minimum wage; AND more than 50% of the employee’s total compensation in a given month must consist of commission payments.[10] Tips are not considered commission payments for the purposes of this exemption, only bona fide commission payments will qualify.

For the purposes of the FLSA, a retail or service establishment is defined as, “. . . an establishment 75 per centum of whose annual dollar volume of sales of goods or services (or of both) is not for resale and is recognized as retail sales or services in the particular industry.”[11]


The protections of the FLSA are designed to ensure that you receive the full value of the work you perform on behalf of your employer. Determining whether you are subject to one of the exemptions to FLSA overtime requirements requires careful, individualized inquiry. If you believe you may be misclassified as an overtime exempt, salaried employee, we encourage you to Contact Us to meet with an attorney and discuss your situation.


[1] 29 U.S.C. § 213(a)(1).
[2] 29 U.S.C. § 207(i).
[3] Fn. 1, supra.
[4] 29 C.F.R. § 541.500(a)(1).
[5] 29 C.F.R. § 541.500(a)(2).
[6] 29 C.F.R. § 541.700(a).
[7] 29 C.F.R. § 541.700(b).
[8] 29 C.F.R. § 541.502.
[9] 29 C.F.R. § 541.500(c).
[10] Fn. 2, supra.
[11] 29 C.F.R. § 779.411; 29 C.F.R. § 779.24 .

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When is a Non-Sales Employee Exempt from Overtime?

The Fair Labor Standards Act (“FLSA”) is a Federal law that requires employees be paid overtime for all hours worked in excess of 40 in a workweek. The FLSA also establishes three narrow “exemptions” from the overtime rule. Certain employees paid on a salary basis may be exempt from overtime, if the majority of tasks they perform in each workweek are properly classified as: “professional,” “executive,” or “administrative.”[1]  Each of these exemptions requires that an employee be compensated at a weekly rate of not less than $455.00 per week for work performed prior to January 1, 2020, and not less than $684.00 per week for work performed thereafter.[2]

In addition, certain sales employees may be exempt from the overtime provisions of the FLSA if they are subject to the “retail service establishment exemption”[3] or the “outside sales exemption.”[4] These exemptions are discussed at: When is a Sales Employee Exempt from Overtime?

There are other, limited circumstances in which an employee may be exempt from the overtime requirements of the FLSA. If you believe you may be mis-classified as an overtime exempt, salaried employee, we encourage you to Contact Us to meet with an attorney and discuss your situation.


The Professional Exemption

The professional exemption applies only to employees such as licensed accountants, engineers, attorneys, doctors, or others who perform work that is traditionally regarded as part of a recognized professional occupation, and which customarily requires the employee to complete a “prolonged course of specialized intellectual instruction” or which requires “invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.”[5] Additionally, the employee must be compensated at a weekly rate of not less than $455.00 per week for work performed prior to January 1, 2020, and not less than $684.00 per week for work performed thereafter.[6]

The Executive Exemption

The executive exemption is limited to workers who are engaged in the management of an enterprise or subdivision thereof, supervise two or more other full-time employees, and have the authority to hire or fire other employees.[7] Additionally, the employee must be compensated at a weekly rate of not less than $455.00 per week for work performed prior to January 1, 2020, and not less than $684.00 per week for work performed thereafter.[8]

The Administrative Exemption

The administrative exemption by its plain terms cannot apply to workers who are involved in the “production side” of a business enterprise, such as workers whose primary role is to assist the company in carrying out the activities for which it is hired by customers (as opposed to ancillary administrative roles such as accounting, human resources, database management, etc.).  Where a worker is involved in production work, they are, per se, a production worker, and not subject to the administrative exemption.

Even if the nature of an employee’s job duties generally meet the requirements of the administrative exemption, the employee must “regularly and customarily” be engaged in work that requires the exercise of discretion and independent judgment.[9]  Federal regulations explain that “discretion and independent judgment involves the comparison and evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered,” and requires “more than the use of skill in applying well-established techniques, procedures or specific standards in manuals or other sources.”[10]  The term “‘matters of significance’ refers to the level of importance or consequence of the work performed.”[11]  Additionally, the employee must be compensated at a weekly rate of not less than $455.00 per week for work performed prior to January 1, 2020, and not less than $684.00 per week for work performed thereafter.[12]

The Burden of Proof

It is important to note that any claim of exemption from the overtime requirements of the FLSA is an affirmative defense, and the burden of proof rests with the employer.  Furthermore, it is an enhanced burden of proof, requiring the employer to demonstrate that a particular employee falls “clearly and unmistakably” within the confines of one or more exemptions. [13] Close calls are thus resolved in favor of the employee.


The protections of the FLSA are designed to ensure that you receive the full value of the work you perform on behalf of your employer. Determining whether you are subject to one of the exemptions to FLSA overtime requirements requires careful, individualized inquiry. If you believe you may be misclassified as an overtime exempt, salaried employee, we encourage you to Contact Us to meet with an attorney and discuss your situation.


[1] 29 U.S.C. § 213(a)(1).
[2] Although the Department of Labor issued a final rule in 2016 increasing the minimum salary basis to a weekly rate of not less than the 40th percentile of weekly earnings of full-time non hourly workers in the lowest-wage Census Region, or $913.00 per week, 29 C.F.R. § 541.600(a), that regulation was struck down in the matter of Nevada v. U.S. Dep’t of Labor, 218 F. Supp. 3d 520 (E.D. Tex. 2016), and cannot be enforced.
[3] 29 U.S.C. § 207(i).
[4] 29 U.S.C. § 213(a)(1).
[5] 29 C.F.R. § 541.300.
[6] See fn. 2, supra.
[7] 29 C.F.R. § 541.100.
[8] See fn. 2, supra.
[9] 29 C.F.R. § 541.200(a)(3).
[10] 29 C.F.R. § 541.202(a) and (e).
[11] 29 C.F.R. § 541.202(a).
[12] See fn. 2, supra.
[13] See, e.g., Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S. Ct. 453, 456 (1960); see also, Alvarez v. IBP, Inc., 339 F.3d 894, 905 (9th Cir. 2003).

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What is a Boutique Law Practice?

“Boutique.” Just pronounce the word out loud and you may experience that mildly queasy feeling that is the aromatic equivalent of being in an elevator with a person wearing too much perfume. The sound of the word, “boutique,” taps into a cultural prejudice that associates all things French sounding with both aristocratic refinement and decadence. Nonetheless, I can find no better way to encapsulate what a boutique law practice is than the word “boutique.” The term fits like a glove because it simultaneously combines the ideas of specialization, individualized treatment, and sophistication.

A boutique law practice is generally defined as a smaller firm with experienced practitioners who advocate in a particular area of law, such as tax or healthcare law. However, specialization is not the only thing that differentiates “boutique law” as a distinct style of practice. There is also a philosophy associated with boutique law that leads to superior legal results. The practice philosophy of the boutique law firm emphasizes specialized, one-of-a-kind legal representation, and seeks to build relationships with clients, not merely transact with them.

Boutique law does not advertise in a popular practice area, like personal injury, family law, or bankruptcy, and then train a staff of $15.00 per hour legal assistants to work in assembly line fashion. Many of the folks that practice law in this style are fine lawyers, they know their specialty well, and they get results, but they practice law differently than the boutique lawyer. This type of lawyer makes his living as a shrewd business manager, generating as many transactions as possible while keeping staffing costs low. The work this lawyer’s office produces generally meets minimum standards, and sometimes rises above that, especially where there is a well-trained and experienced legal staff. But this lawyer and his staff are not equipped to do the investigation, research, analysis and planning required to advise you about whether, for example, you should accept a low settlement offer on a lawsuit so that you can realize higher returns through the sale of your company to a prospective buyer.

Boutique law firms are not those giant national firms that hire an army of associates, paralegals and legal assistants to churn through mountains of files for banks or insurance companies, applying the same processes to each case. Again, many of the professionals that work in these areas are excellent practitioners. They know their practice area well, they are consummate professionals, and they get results. They tend to be relationship oriented and they seek to advance long-term client objectives. But they are not that Brandeisian lawyer who learns everything about how shoes are made, everything about the shoe-making industry, and every applicable law, regulatory practice, and legislative process, for sole the purpose of representing a few shoe manufacturers. (Read more about one of the greatest attorneys ever at https://en.wikipedia.org/wiki/Louis_Brandeis).

Boutique law practitioners reach for that “Brandeisian ideal.” They do not pigeon-hole their legal outlook by learning one area of practice in-depth and then forgetting about all others. While boutique law specializes, it specializes in a manner that incorporates a broad-based and sophisticated understanding of substantive, procedural, and regulatory legal frameworks with personal, social, and economic realities. It aspires toward that ever elusive, ever alluring ideal of zealous advocacy. Boutique law practitioners are constantly curious, constantly stretching their boundaries, constantly researching, constantly learning, and constantly improving as lawyers. Boutique law practitioners focus on solving particular problems, and they understand that every problem is unique. There is no one type of solution or one type of process that can be relied on to fix every legal problem. But there is a legal methodology that allows diligent practitioners to craft unique solutions to each client’s problem. That is what boutique law practitioners aspire to.

Hutchings Law Group aspires to incorporate a boutique law philosophy into its mission of assisting people to solve their legal challenges. Hutchings Law Group helps small healthcare practices, small businesses, local property investors, homeowners, and working people by crafting one-of-a-kind solutions to their legal difficulties. We represent employees in employment claims and litigation, both individually and in class action cases; we make first-party insurance claims and bring litigation on behalf of policy holders; we provide outside general counsel and commercial litigation services to business owners; we represent business and property owners in property disputes; and we represent people that have been injured by the fault of another in personal injury claims and litigation. We represent our clients by diligently investigating the facts underlying and surrounding each situation. We then research applicable substantive and procedural law and craft strategies that are designed to address each client’s circumstances. We coordinate these strategies and solutions with marketplace realities to give clients sound, common sense advice.

If you’re looking for excellent, tailor-made legal representation, sans the French perfume and aristocratic decadence, contact Hutchings Law Group today, we can help.

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