June 19, 2012

Drug Reps’ Overtime Claims Rejected by US Supreme Court

Posted in Exempt/Non-Exempt Employees, Fair Labor Standards Act, Outside Sales Exemption, Overtime tagged , , , , , , at 9:57 am by Tom Jacobson

In a much-anticipated decision, the United States Supreme Court has rejected the overtime claims brought by pharmaceutical sales representatives in the case of Christopher v. Smithkline Beecham Corp.

The case centered around a group of drug reps whose primary objective was to obtain nonbinding commitments from physicians to prescribe Glaxosmithkline’s products in appropriate cases. Each week the reps spent about 40 hours in the field calling on physicians during normal business hours and an additional 10 to 20 hours attending events and performing other tasks. They were not required to punch a clock or report their hours, and they were subject to only minimal supervision. The reps were well compensated, and their gross pay included a base salary plus incentives determined based on the performance of their assigned portfolio. Because they were not paid time-and-a-half wages when they worked more than 40 hours per week, they brought claims for unpaid overtime under the Fair Labor Standards Act (FLSA).

In a 5-4 decision filed June 18, 2012 the nation’s highest court threw out the reps’ claims. To reach this conclusion, the Court first rejected the Department of Labor’s interpretations of the FLSA on this issue. This is a very important aspect of the case because it sends a signal that comparable DOL interpretations on related issues (for example, that mortgage loan brokers are not exempt under the FLSA) may not be given the deference that is often afforded to the DOL.

After declining to adopt the DOL’s interpretation of the FLSA’s outside sales exemption as applied to these employees, the Court then analyzed the language of the FLSA itself and concluded that these sales reps were subject to the FLSA’s outside sales exemption and, therefore, were not entitled to overtime pay.

What you need to know: The Supreme Court’s decision provides some much-needed clarification of the FLSA. In particular, it indicates that the outside sales exemption is to be broadly applied. Therefore, it is likely that more sales reps will be found to fall under this exemption.  Even so, whether an employee actually falls under this exemption will depend on the specific facts and circumstances of each case.  Therefore, any employer employing a sales force should carefully analyze those jobs to determine if they fall under the FLSA’s outside sales exemption.

For more information about this article, please contact me at taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2012 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

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