U.S. Supreme Court Applies Broad Definition To “Sales” Portion Of Overtime Exemption For Outside Salespersons

The United States Supreme Court recently decided a major case,  Christopher v. SmithKline Beecham Corp., involving the extent to which pharmaceutical representatives are excluded from overtime coverage under the “outside salesperson” exemption.

A divided Court determined that pharmaceutical sales representatives (“PSRs”) qualify for the “outside sales” exemption of the Fair Labor Standards Act.  The Court decided that under the most reasonable interpretation of DOL regulations, PSRs qualified as “outside sales” employees who are therefore exempt from the FLSA’s overtime requirements.

The Court rejected the argument that PSRs don’t actually make a “sale.” (Rather, PSRs simply market the drug product to doctors.)  But the overtime statute defines “sale” to include a “consignment for sale,” and a “consignment for sale” does not involve the transfer of title.  Thus, a restricted interpretation of “sale” is inconsistent with the precise language of the overtime law.  The Court adopted a functional, rather than a formal, inquiry, one that views an employee’s responsibilities in the context of the particular industry in which the employee works.

Given this broad reading, it followed that PSRs made sales under the overtime law and thus are exempt outside salespersons.  They obtain nonbinding commitments from physicians to prescribe drugs.  This kind of arrangement, in the unique regulatory environment within which pharmaceutical companies operate, is the only way PSRs can make “sales.”

Overtime cases require legal analysis of federal statutes, U.S. Department of Labor regulations, and court decisions.  I can help you with any employment law or labor law questions that you might have.  Please feel free to contact me for a free initial consultation about employment law or labor law.

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