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U.S. Supreme Court Rules that Pharmaceutical Sales Representatives Are Not Entitled to Overtime Pay

Under the Fair Labor Standards Act (FLSA), employers are generally required to pay overtime to employees. In Christopher v. SmithKlineBeecham Corp., pharmaceutical sales representatives sued their employers for overtime wages owed pursuant to the FLSA. However, there is an outside salesmen exception to the FLSA. The defendant pharmaceutical company maintained that these employees fell under the outside salesmen exemption. The 9th Circuit Court of Appeals ruled in favor of the defendant, and the plaintiffs appealed.

The U.S. Supreme Court determined that pharmaceutical sales representatives fell under the outside salesman exemption to the FLSA and were, therefore, not entitled to overtime wages. There are several important aspects of this decision:

  • In rejecting the Department of Labor’s definition of “sale,” the Supreme Court notes that the department changed its definition during the course of litigation and failed to provide fair warning to pharmaceutical companies that would be subject to the overtime requirements.
  • Since the Court did not give deference to the department’s definition, it interpreted the regulation on its own.
  • The Court explained that the definition of “outside salesmen” depends on the relevant industry. Since it is illegal for representatives to sell pharmaceutical drugs, the most they can do is obtain nonbinding commitments to prescribe from doctors.
  • The dissenting justices saw the representatives as akin to promoters, since there is no guarantee, even with a nonbinding commitment, that a doctor is going to ultimately prescribe a particular drug.
  • The majority, however, held that obtaining these commitments falls within the statute’s definition of sale.
  • The Court also found that the representatives are like outside salespeople in other ways, like working with little supervision and getting paid a base salary plus commission. The Court found that they are usually paid well above the minimum wage, which is the policy reason for the FLSA’s outside salesmen exception.

If you have questions about how your business can comply with wage laws, contact an experienced Washington, D.C. attorney who can answer your questions and provide skilled legal guidance.

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