Death of the Pharmaceutical ‘Salesman’? The Supreme Court to Decide Whether Pharmaceutical Sales Representatives are Exempt from Overtime Pay

On November 28, 2011, the United States Supreme Court granted certiorari in a Fair Labor Standards Act (“FLSA”) case that could clarify the Department of Labor’s (“DOL”) scope of regulatory authority and will determine whether pharmaceutical sales representatives are exempt from receiving overtime pay.  In Christopher v. SmithKline Beecham, the court will decide on two issues:

1.  Whether the court must show deference to the DOL’s interpretation of the outside sales exemption under the FLSA; and

2.  Whether the outside sales exemption applies to pharmaceutical sales representatives.

Under the FLSA, employees classified as “outside salesmen” are exempt from the overtime pay provisions.  In Christopher, a pharmaceutical sales representative brought suit against his employer for failing its failure to pay overtime.  Christopher argued that he was a non-exempt employee under the FLSA.  The district court granted summary judgment for the employer finding pharmaceutical sales representatives are exempt from FLSA overtime requirements. 

Christopher appealed the decision arguing the district court erred when it failed to show deference to the Secretary of the DOL’s (the “Secretary”) construction as set forth in an amicus brief filed in In re Novartis Wage & Hour Litigation.  In that brief, the Secretary argued that pharmaceutical sales representatives were not exempt from the FLSA overtime provisions.  The Secretary took the position that pharmaceutical sales representatives only promoted pharmaceuticals to the physician and that the pharmaceutical themselves were later purchased by patients from pharmacies.  Under this model, pharmaceutical sales representatives were not making sales and could not be classified as outside salesmen.

The Ninth Circuit disagreed with Christopher and affirmed the district court ruling.  In its decision, the Ninth Circuit found the distinction between sales and promotion proffered by the Secretary to be unpersuasive and declined to give deference to the interpretation.  The Ninth Circuit also acknowledged that its holding was in contradiction with the Novartis holding where the court found pharmaceutical sales representatives were not exempt from the overtime provisions.

With oral arguments likely to occur in the spring of 2012, the Supreme Court’s decision will likely resolve the current circuit split in this area and will have a significant impact on the scope of the DOL’s regulatory authority.

For more information, please contact LaVonne Pulliam at lpulliam@beneschlaw.com, or (216) 363-4507.

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