In a major victory for pharmaceutical companies, the U.S. Supreme Court recently held that company sales representatives who promote their employer’s products to doctors and hospitals are exempt from the overtime requirements of the Fair Labor Standards Act (“FLSA”). In doing so, the Court resolved a split in the Circuit Courts of Appeal over the scope of the “outside salesman” exemption to the FLSA’s overtime pay requirements. The Court’s holding in Christopher v. SmithKline Beecham Corp. regarding the scope of this exemption has provided much needed clarity to pharmaceutical companies and employers with similar types of sales forces who have relied – and hope to continue to rely – on the exemption.
Tagged: Pharmaceutical Sales Representatives
The United States Court of Appeals for the Seventh Circuit has held that two pharmaceutical companies did not violate the Fair Labor Standards Act (FLSA) by failing to pay overtime to their sales representatives, concluding that the FLSA’s “administrative exemption” from the statute’s overtime requirements was applicable to these employees. Although the Court’s opinion focused on the job duties of pharmaceutical sales representatives (PSRs), the Court’s analysis of the general scope of the administrative exemption may prove useful to employers in other industries.
Recent Case Law Focuses Heavily on “Outside Salesman” and “Administrative” Exemptions to the Fair Labor Standards Act
The issue of whether pharmaceutical company sales representatives who promote their employer’s products to doctors and hospitals are exempt from the overtime requirements of the Fair Labor Standards Act (“FLSA”) has spurred litigation across the country. Courts have considered whether these employees are entitled to overtime compensation or are exempt under the “outside salesman” or “administrative” exemptions recognized by the FLSA. The results have been inconsistent, leaving employers with many questions. For example, the Second Circuit (covering the states of New York, Connecticut, Vermont) has held that the pharmaceutical company sales representatives at issue did not qualify for either the “outside salesman” or “administrative” exemptions and were entitled to overtime compensation. Conversely, the Ninth Circuit (covering California, Alaska, Arizona, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) recently held the pharmaceutical sales representatives were exempt from the FLSA’s overtime requirements under the “outside salesman” exemption, noting that the term “sale” must be ready broadly to include employees who “in some sense” sell. The Ninth Circuit ruled that the Department of Labor regulations, which supported a finding that the “outside salesman” exemption applied to the pharmaceutical representatives, were entitled to substantial deference and disagreed with the Second Circuit’s conclusion to the contrary. Most recently, the Third Circuit (covering New Jersey, Pennsylvania and Delaware) held that a pharmaceutical company’s sales representatives qualified for the “administrative” exemption in large part because they “executed nearly all of [their] duties without direct oversight.” Interestingly, despite the different results, the sales representatives at issue in the cases decided by the Second and Third Circuits performed similar functions.