Pharma Sales Reps Not Entitled To Overtime, Supreme Court Rules

On June 18, 2012, in an opinion written by Justice Samuel Alito for a 5-4 majority, the U.S. Supreme Court held that pharmaceutical sales representatives are not entitled to overtime pay. The question before the Court was whether or not the sales reps were employed "in the capacity as outside salesmen" and therefore within an exemption in the Fair Labor Standards Act (FLSA) from the overtime pay requirements. Because wage and hour disputes are a growing area of employment related litigation, the Court's opinion is potentially significant. It also has a number of other interesting features, as discussed below.

The plaintiffs are two pharmaceutical sales representatives who were employed by the defendant pharmaceutical company (which does business as GlaxoSmithKline) for about four years. During that time they worked about 50 to 70 hours a week. About 40 hours were devoted to field work, visiting doctors, with the rest of the time spent on office work (email, etc.). The purpose of their office visits was, as the Court put it, "obtain a nonbinding commitment from the physician to prescribe [defendant's] drugs." The plaintiffs "were well compensated for their efforts," earning over $70,000 annually, in base and incentive compensation. They were not paid overtime when they worked more than 40 hours per week.

The plaintiffs filed an action in federal court alleging that their employer violated the FLSA by failing to pay overtime. The company argued that because the plaintiffs were employed "in the capacity of outside salesmen" they were exempt from the FLSA's overtime requirements. The district court entered summary judgment in the company's favor. The plaintiffs them filed a motion with the court to alter or amend its motion, arguing that the district court failed to give appropriate deference to a Department of Labor interpretation of the FLSA regulation, which the plaintiffs contended supported their overtime claim. The district court rejected this argument and denied the motion.

Click here to read the entire post. subscribers can access a Lexis enhanced version of the Christopher v. Smithkline Beecham Corp., 2012 U.S. LEXIS 4657 (U.S. June 18, 2012) decision with summary, headnotes, and Shepard's.

Read other items of interest from the world of directors & officers liability, with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.

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