Justices to decide whether drug reps are entitled to overtime

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By Pat Murphy
Dolan Newswires

The U.S. Supreme Court will decide whether federal courts should give deference to the Secretary of Labor’s interpretation of the Fair Labor Standards Act’s outside sales exemption to make pharmaceutical sales representatives eligible for overtime.

The Act’s outside sales exemption exempts from the statute’s overtime requirements “any employee employed … in the capacity of an outside salesman.” The Secretary of Labor has implemented various regulations purportedly making the outside sales exemption inapplicable to pharmaceutical sales representatives.

In this case, the plaintiffs were employed as sales representatives by GlaxoSmithKline. Glaxo classified the plaintiffs as “outside salesmen,” making them ineligible for overtime compensation.

The plaintiffs sued Glaxo for violating the Act, claiming they were not outside salesmen under the Secretary of Labor’s current interpretation of existing Department of Labor regulations. Specifically, the plaintiffs argued that they were not outside salesmen because, rather than completing actual sales, they promoted Glaxo’s products to doctors in an effort drive up the number of prescriptions.

But the 9th Circuit concluded that the Secretary’s interpretation was inconsistent with the Act and, therefore, not entitled to deference.

“Under the Secretary’s view, ‘sale’ means unequivocally the final execution of a legally binding contract for the exchange of a discrete good. In addition to the point that such stringent wording is not found in [the Act], or plausibly implied from phrases like ‘other disposition,’ the Secretary’s approach transforms what … has [long] been recognized as a multifactor review of an employee’s functions into a single, stagnant inquiry,” the court said.

The 2nd Circuit has reached a contrary conclusion.

A decision from the Supreme Court is expected later this term.

Christopher v. SmithKline Beecham Corp., No. 11-204. Certiorari granted:  Nov. 28, 2011. Ruling below: 635 F. 3d 383 (9th Cir. 2011).