U.S. Supreme Court Hears Arguments On Overtime For Pharmaceutical Reps

WASHINGTON, D.C. - (Mealey's) Pharmaceutical sales representatives, or "detailers," "tout" drugs to doctors but do not actually engage in sales as defined in the Fair Labor Standards Act (FLSA) and thus are entitled to overtime pay, an attorney representing a class of sales representatives argued April 16 before the U.S. Supreme Court (Michael Shane Christopher, et al. v. SmithKline Beecham Corporation, dba GlaxoSmithKline, No. 11-204, U.S. Sup.). 

(Oral arguments transcript available. Document #43-120420-008T.)

"[T]he debate over whether it [the FLSA definition of 'a sale'] includes or is limited to a transfer of title is not at issue in this case, because . . . all the statute requires is that there at the very least be some exchange of some part.  There's going to be . . . a binding agreement, a commitment, and that commitment will involve an exchange with the employer.  What happens in pharmaceutical detailing is that there can't be any commitment to issue a prescription at all," Thomas C. Goldstein of Goldstein & Russell in Washington argued on behalf of the workers.   

Malcolm L. Stewart of the U.S. Department of Justice in Washington argued on behalf of the United States, in support of the workers, that a sale, if it does not involve a transfer of title, would have to involve "a transfer of possession in contemplation of a transfer of title."   

Paul D. Clement of Bancroft PLLC in Washington, representing SmithKline Beecham Corp., doing business as GlaxoSmithKline, countered that the workers in question are not entitled to overtime.  "Petitioners are two pharmaceutical sales representatives.  They were hired for a sales job.  They were given sales training.  They attend sales conferences.  They are assigned to sales territory, and they are evaluated and compensated as sales people," he told the justices.  When Chief Justice John G. Roberts Jr. stated that the employees "don't do sales," Clement responded, "With respect, Mr. Chief Justice, we disagree.  We think they do make sales in the way that is relevant in this industry, and we do think they make sales in some sense, which is the practical construction the agency [the U.S. Department of Labor (DOL)] has always put on the sales requirement."    

Sales Calls 

GlaxoSmithKline hired Michael Christopher and Frank Buchanan as pharmaceutical sales reps (PSRs) in 2003.  Christopher was terminated in May 2007, and Buchanan left Glaxo when he accepted a PSR position at another pharmaceutical company. 

Glaxo uses its PSRs to call on physicians and encourage them to prescribe Glaxo products.  During the calls, PSRs provide the physicians with information about Glaxo's products and product samples and try to convince the physicians to prescribe Glaxo products over competitors' products. 

PSRs usually work outside of a Glaxo office and spend most of their time traveling to see physicians.  Christopher and Buchanan visited eight to 10 physicians each day.  They claimed that they worked 10 to 20 hours extra per week and received no overtime wages.  When not visiting with physicians or traveling to and from their appointments, Christopher and Buchanan claimed, they were studying Glaxo products, preparing presentations, answering calls, checking email, generating reports and attending various events on evenings and weekends. 

Glaxo's PSRs receive two forms of pay:  a salary and incentive-based compensation.  The incentive-based compensation is paid if Glaxo's market share for a particular product increases in a PSR's territory, if sales volume for a product increases, if sales revenue increases or if the dose volume increases.  Glaxo aims to have 25 percent of a PSR's total compensation come from incentive-based pay.  However, incentive-based compensation is uncapped. 

Class Complaint 

Christopher and Buchanan filed a class complaint against Glaxo in the U.S. District Court for the District of Arizona in August 2008, seeking unpaid overtime.  Both parties moved for summary judgment, and the plaintiffs moved to certify a conditional class. 

The District Court granted Glaxo's motion for summary judgment, opining that PSRs "unmistakably fit within the terms and spirit of" the FLSA's outside sales exemption.  Christopher and Buchanan then moved to alter or amend the judgment based on the District Court's failure to consider an amicus brief filed by the U.S. secretary of Labor in an FLSA appeal that was pending at that time before the Second Circuit, In re Novartis Wage & Hour Litig. (611 F.3d 141 [2d Cir. 2010]).  The District Court rejected the plaintiffs' argument that the DOL brief was entitled to deference under either Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. (467 U.S. 837 [1984]) or Auer v. Robbins (519 U.S. 452 [1997]).  Christopher and Buchanan appealed. 

Affirming the District Court's ruling, the Ninth Circuit panel opined in February 2011 that it must ignore the secretary of labor's brief.  Christopher and Buchanan then petitioned the U.S. Supreme Court.  

Counsel 

In addition to Goldstein, Christopher and Buchanan are represented by Michael R. Pruitt of Jackson White in Mesa, Ariz.  Neal D. Mollen of Paul Hastings in Washington joins Clement in representing SmithKline. 

Cory L. Andrews of Washington Legal Foundation in Washington filed an amicus brief on behalf of the Washington Legal Foundation, the Allied Education Foundation and the CATO Institute.  Jeffrey S. Bucholtz of King & Spalding in Washington filed an amicus brief on behalf of Pharmaceutical Research and Manufacturers of America.  Aashish Y. Desai of Desai Law Firm in Irvine, Calif., filed an amicus brief on behalf of a certified class of pharmaceutical representatives from Johnson & Johnson.  Michael R. DiChiara of DiChiara Law Firm in Park Ridge, N.J., filed an amicus brief on behalf of pharmaceutical representatives.  John C. Eastman of the Center for Constitutional Jurisprudence in Orange, Calif., filed an amicus brief on behalf of the Center for Constitutional Jurisprudence.   

Kevin M. Kraham of Littler Mendelson in Washington filed an amicus brief on behalf of National Federation of Independent Business Small Business Legal Center.  Matthew W. Lampe of Jones Day in New York filed an amicus brief on behalf of Chamber of Commerce of the United States of America.  Paul W. Mollica of Outten & Golden in New York filed an amicus brief on behalf of National Employment Lawyers Association and National Employment Law Project.  Sarah M. Shalf of Emory Law School Supreme Court Advocacy Project in Atlanta filed an amicus brief on behalf of medical professionals.  Rae T. Vann of Norris, Tysse, Lampley & Lakis in Washington filed an amicus brief on behalf of Equal Employment Advisory Council.   

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