High Court Rules Pharmaceutical Sales Reps Are Exempt From FLSA's Overtime Requirements

On June 18, 2012, with Justice Samuel Alito writing for a 5-4 majority, the U.S. Supreme Court considered whether the term "outside salesman," as defined by Department of Labor (DOL) regulations, encompasses pharmaceutical sales representatives. The Court ruled that these sales representatives qualify as outside salesmen and thus, are exempt from the overtime compensation requirements of the Fair Labor Standards Act (FLSA). Given "the industry's decades-long practice of classifying pharmaceutical detailers as exempt employees" and the DOL's failure to initiate any enforcement actions with respect to sales representatives, the Court found that a decision to the contrary "would result in precisely the kind of 'unfair surprise' against which our cases have long warned." Although a critical decision for the pharmaceutical industry in its own right, the case generally has been viewed more importantly for its insight as to the weight the Supreme Court would give to agency views of the laws they enforce. Christopher v. SmithKline Beecham Corp., DBA GlaxoSmithKline, No. 11–204, U.S. Supreme Court (June 18, 2012).

Factual Background

SmithKline Beecham Corporation develops, manufactures, and sells prescription drugs. Pharmaceutical companies, such as SmithKline, promote their drugs to physicians through a process called "detailing," whereby their employees ("detailers" or "pharmaceutical sales representatives") provide information to physicians about the company's products in hopes of persuading them to write prescriptions. These representatives' primary duty is to obtain nonbinding commitments from physicians to prescribe their employer's prescription drugs.

SmithKline pharmaceutical sale representatives spend approximately 40 hours each week calling on physicians to discuss benefits, features, and risks of certain drugs. Outside of normal business hours, the representatives spend an additional 10 to 20 hours each week attending events, reviewing product information, returning phone calls, responding to emails, and performing other miscellaneous tasks. SmithKline did not pay the representatives time-and-one-half wages when they worked in excess of 40 hours per week.

Several of SmithKline's pharmaceutical sales representatives brought suit against the company arguing that SmithKline violated the FLSA by failing to compensate them for overtime hours worked. The trial judge ruled in favor of SmithKline. The representatives filed a motion to alter or...