Monday, June 18, 2012

Pharmaceutical sales representatives not entitled to overtime pay, says US Supreme Court

The United States Supreme Court today clarified the scope of the “outside sales” exemption in the context of the Fair Labor Standards Act (FLSA). In Christopher v.SmithKline Beecham Corp., Case no. 11-204, the Court held that pharmaceutical sales representatives, also known as detailers, fell under the exemption and were not owed for overtime pay. 

The FLSA requires employers to pay employees overtime wages for all time worked in excess of 40 hours per week unless the workers fall under certain specific exemptions, one of which covers outside sales persons. This means that if an employee qualifies as an outside sales person, the employer is not required to pay overtime wages. But the Act does not define what constitutes an outside sales person and instead leaves it up to the Department of Labor to determine the criteria for this exemption. The Department of Labor has issued criteria to define an outside sales person, three of which were at issue in this Supreme Court case. The first criterion is that an outside sales person is one whose primary duty is making sales, including a sale, exchange, contract of sale, consignment for sale, or shipment for sale. The second at issue is that the DOL determined that sales must include a transfer of property. The third criterion at issue is that promotions for one's own sales would fall into the exemption, while promotions incidental to another's sales would not. 

The Supreme Court focused on the pharmaceutical sales representative and ruled that this type of sales person falls into the exemption for several reasons. The first reason given was that a transfer of title is not required, rather a transfer of title somewhere within the terms of the sale was sufficient. The Court ruled that requiring a transfer of title is too narrow of an interpretation of legislative intent and Congress, based on the wording of the FLSA, intended a broader meaning of the term “sale.” Therefore, the nonbinding commitment to prescribe (the typical form of sale made by a detailer) should be considered a sale because there will be a transfer of title when the doctor prescribes the medication. The Court also noted that in ruling that this action constitutes a “sale,” any promotions by these detailers would be in furtherance of their own sales. The court further noted that there was a fairness issue involved. Employers had no reason, until 2009, to suspect that treatment of detailers as exempt employees violated the FLSA. Furthermore, considering the inaction of the DOL in following up on its regulations, employers had no reasons to suspect that their treatment of detailers violated the act. Therefore the Court held that pharmaceutical representatives employed in this manner fell under the outside sales exemption of the FLSA.

If you have a legal question regarding your status under the FLSA and whether you are being compensated fairly for your overtime hours, call the employment lawyers at Turkheimer & Hadden LLC.

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