The U.S. Supreme Court this morning ruled, 5-4, that pharmaceutical representatives are “outside salesmen” under the Fair Labor Standards Act. In plain English, this now means that those representatives are now considered exempt from overtime.
This decision is a big victory for pharmaceutical companies who have been facing years of class action suits (some of which settled in a very high profile manner). For background on the subject, you can see my prior posts here and here.
You can download the decision in Christopher v. SmithKline Beecham Corp. here.
The decision split along familiar ideological lines with Justice Kennedy casting the decisive vote in favor.
The first part of the decision rests on whether the Department of Labor’s position on the subject requires deference. The Court concludes that it does not because of the agency’s shifting (and unpersuasive) reasons.
In looking at the text of the statute itself, the court suggests that “The statute’s emphasis on the “capacity” of the employee counsels in favor of 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.”
Ultimately, the court concludes that “petitioners made sales for purposes of the FLSA and therefore are exempt outside salesmen within the meaning of the DOL’s regulations. Obtaining a nonbinding commitment from a physician to prescribe one of respondent’s drugs is the most that petitioners were able to do to ensure the eventual disposition of the products that [the company] sells.”
The pharaceutical representative position here is fairly unique so it remains to be seen whether this decision will have any dramatic impact outside the pharaceutical industry, but at the very least, those companies should be breathing a big sigh of relief today.