Congress considers inside sales reform again

By Staff -- Industrial Distribution, 5/1/2000

Washington, D.C The National Assn. of Wholesaler-Distributors is hoping inside sales reform provisions will be swept along with the rising tide of Congressional sentiment to raise the minimum wage.

Included in an omnibus minimum wage and tax relief package passed by the U.S. House of Representatives in March is language to exempt inside sales representatives from minimum wage and overtime requirements. If the wording becomes part of a law, companies would be able to pay inside sales employees who meet certain criteria a base salary plus commission.

The reform language is part of H.R. 3081, which includes amendments to the Fair Labor Standards Act of 1938 and changes to the Internal Revenue Code of 1986, including tax benefits for small businesses. The minimum wage provisions would phase in a one-dollar increase to $6.15 by April 2002. Alan Kranowitz, NAW's senior vice president of governmental relations, says although the organization doesn't support a minimum wage hike, the Washington consensus is that one is inevitable and the inside sales reform language is the cloud's silver lining.

Following House passage as two separate bills, the combined bill was read into the Senate in March. The Senate bill is also attached to bankruptcy reform legislation says Ron Reese, senior director of governmental relations for NAW, so the reconciliation process will take a lot of work.

"We're optimistic the final version will include inside sales, but there's a lot of policy and maneuvering that has to take place before we get to that stage," Reese says.

As things stand now, the wholesale distribution industry is at a competitive disadvantage in the hiring process because some salespeople looking for jobs prefer to work on commission. Charlie Banks, president and CEO of Ferguson Enterprises, Inc. in Newport News, Va., says his distributorship is greatly affected by the regulations because it employs more than 1,000 inside sales representatives.

"It limits the kinds of incentive programs you can have because you have to adjust it every week for overtime," Banks says. "It makes it hard to hire college grads who don't want to be on the clock. [It also] makes it difficult to compete with retailers who have different guidelines for wages and hours than wholesalers."

Gary Buffington, executive vice president of the Industrial Distribution Assn., says the changes have been sought by distribution executives for a long time.

"The existing laws treat inside sales reps as though they were sales clerks, but they're not," Buffington says. "They're customer service and product specialists. It's unfair to treat them as hourly-type employees. The result has been that a lot of distributors haven't treated them as they should, as professionals."

Reese also points out that technological advances since the 1930s, including computers and e-mail, fax machines and advances in telephone systems, make it possible for office employees to perform increasingly complex tasks. Banks says inside product knowledge is as important to the success of a company as outside product knowledge.

"Customers are looking for more and more from [inside sales representatives]," Banks says. "We're governed by a 70-year-old law that doesn't appreciate their importance to the business."