Supreme Court To Review Whether Pharmaceutical Sales Representatives Are Exempt Under The Fair Labor Standards Act in Christopher v. SmithKline Beecham Corp.
The U.S. Supreme Court has just agreed to review Christopher v. SmithKline Beecham Corp., a significant case concerning pharmaceutical sales representatives. At issue, whether the sales reps are considered exempt or not exempt under the Fair Labor Standards Act (FLSA). If the court determines the reps are “outside salespersons” they would be considered exempt under the FLSA and not entitled to overtime pay. Alternatively, the sales reps would be entitled to receive back wages and overtime compensation if the court determines the reps do not fall within the "outside salesperson" exemption. Although the 9th Circuit found that the reps were exempt, the 2d Circuit found they were not. The Supreme Court's decision will provide critical guidance concerning the application of the "outside sales exemption."
Determining whether a worker is exempt v. non-exempt is one of the most frequently disputed matters in employment law. This determination can seriously affect the amount of money a worker brings home in wages and overtime. According to the FLSA, all non-exempt employees are entitled to overtime pay at a rate of one and one-half times their regular rate of pay for all hours worked in any workweek. If you have questions concerning your classification and whether you are entitled to overtime pay, it is a good idea to speak to a knowledgeable wage and hour lawyer.
In Christopher v. SmithKline Beecham, the U.S. Court of Appeals for the 9th Circuit determined that pharmaceutical sales representatives were exempt from overtime based on the FLSA’s outside sale exemption. In order to meet the outside sales exemption, an employee must meet the following tests:
• That his or her primary duty is making sales or obtaining orders or contracts; and
• The employee must be “customarily and regularly” engaged not at the employer’s place of business
The 9th Circuit determined that even though pharmaceutical sales reps do not “sell” to doctors, a “common sense” interpretation of their duties placed them within the terms of the outside sales exemption.
Previously, in a case involving similar issues, In re Novartis, the 2d Circuit determined just the opposite - that the outside sales exemption did not apply to pharmaceutical sales reps, and as a result, the workers were entitled to overtime pay. Specifically, the 2d Circuit determined that because federal law prohibits the sales reps from entering into contracts to sell the pharmaceutical products, they do not qualify for the exemption.