Supreme Court Clarifies The Application Of The FLSA Outside Sales Exemption For Pharmaceutical Sales Representatives Rights

Author:Mr Andrew Orsmond and Robert A. Fisher
Profession:Foley Hoag LLP
 
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On June 18, 2012, the United States Supreme Court held in Christopher v. Smithkline Beecham Corp., that pharmaceutical company sales representatives — often called "detailers" because they provide physicians with detailed information about pharmaceutical products —  are exempt from the overtime compensation requirements of the Fair Labor Standards Act ("FLSA") under the "outside sales" exemption.  At issue was whether the exemption applied to detailers who, unlike traditional salespersons, do not actually take binding orders or transfer ownership of products to their customers.  By concluding that detailers are nonetheless "outside sales" employees, the Supreme Court resolved an open question that affects nearly 90,000 employees working in similar roles within the pharmaceutical industry.

The case began when a class of former detailers sued Smithkline, claiming that they were owed compensation for overtime hours.  Because of the regulatory environment applicable to pharmaceutical companies, detailers cannot sell products to physicians or patients.  Rather, in order to protect physicians' independence to prescribe medications, detailers can only promote products and obtain non-binding commitments from physicians to prescribe products in appropriate circumstances.  Thus the detailers argued that they were not exempt "outside sales" employees because they did not actually sell anything.  Both the federal District Court for the District of Arizona and the Ninth Circuit Court of Appeals disagreed, holding that the detailers' argument elevated form over substance and that they were still "selling" within the meaning of the "outside sales" exemption.  Shortly before the Ninth Circuit's decision, however, the Second Circuit Court of Appeals reached the opposite conclusion...

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