Supreme Court Sides With Pharmaceutical Companies In Christopher v. Smithkline Beecham Corp.

Author:Mr Craig Boggs and Jeannil D. Boji
Profession:Perkins Coie LLP

On June 18, 2012, the U.S. Supreme Court sided with pharmaceutical companies in a case that could have cost the industry billions in unpaid overtime wages and related costs. In Christopher v. SmithKline Beecham Corp., No. 11-204 (June 18, 2012), the Court held in a 5-4 decision that pharmaceutical sales representatives ("PSRs") who promote sales of prescription drugs but do not themselves transact the sales, qualify as "outside salesmen" under the most reasonable interpretation of the Fair Labor Standards Act ("FLSA") and are thus exempt from FLSA's overtime wage requirements. In affirming the Ninth Circuit's holding that the PSRs qualify as "outside salesmen," the Court resolved a circuit split (overruling a recent Second Circuit decision on the issue) and also rejected the Department of Labor's ("DOL") interpretation of the statute.

The Court first addressed the issue of whether the DOL's position was entitled to deference. The Court found that, although Auer v. Robbins, 519 U.S. 452 (1997), ordinarily calls for deference to an agency's interpretation (even when advanced in a legal brief), deference in this case was inappropriate where (1) the DOL's reasoning for its interpretation has been inconsistent, (2) adopting the interpretation would result in "unfair surprise" to the pharmaceutical industry, and (3) the DOL's interpretation was unpersuasive.

The Court then applied rules of...

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