Justices 5-4 Reject Labor Department View, Find Pharmaceutical Sales Reps FLSA-Exempt

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Finding a Labor Department interpretation of regulations interpreting the Fair Labor Standards Act “lacks the hallmarks of thorough consideration,” the U.S. Supreme Court June 18 held that pharmaceutical sales representatives who encourage doctors to prescribe the use of a company's products are “outside salesmen” who are exempt from the overtime protections of the federal wage and hour law (Christopher v. SmithKline Beecham Corp. d/b/a GlaxoSmithKline, U.S., No. 11-204, 6/18/12).

Writing for the majority in the 5-4 decision, Justice Samuel A. Alito said since 2009, DOL has argued in several amicus briefs that pharmaceutical “detailers” were not FLSA-exempt because they did not make sales to the physicians they contacted.

However, Alito said DOL's position was “quite unpersuasive” and was not entitled to judicial deference.

Alito noted that FLSA defines the terms “sale” and “sell” to include an “other disposition.”

Labor Secretary Hilda Solis submitted an amicus brief in August 2010 arguing to the U.S. Court of Appeals for the Ninth Circuit that the pharmaceutical sales representatives were not “outside sales” employees exempt from FLSA's overtime requirements (61 BTM 267, 8/24/10). The Ninth Circuit declined to award deference to the amicus brief filed by the department.

Majority Affirms Lower Court Ruling

Because the detailers' standard practice of obtaining nonbinding commitments from physicians “comfortably falls within the catch-all category of 'other disposition,' ” the majority affirmed the Ninth Circuit's ruling that detailers could not recover for a failure of SmithKline Beecham Corp., doing business as GlaxoSmithKline, to pay them overtime compensation.

Chief Justice John G. Roberts and Justices Antonin Scalia, Anthony M. Kennedy, and Clarence Thomas joined in the majority opinion.

Justice Stephen G. Breyer, joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor, and Elena Kagan, dissented. Breyer agreed with the majority that the government's interpretation of the DOL regulations was not entitled to “any especially favorable weight.”

But the dissent argued that because pharmaceutical detailers are merely promoting sales made by other individuals, they should not be considered to fall within FLSA's exemption for outside salesmen.

Full text of the decision is available at http://op.bna.com/dlrcases.nsf/r?Open=ldue-8vdkpg