Pharmaceutical Sales Representative Case Goes to Supreme Court
In a previous post in August, I questioned whether the pharmaceutical companies were losing the exemption battle as it related to pharmaceutical sales representatives and the outside sales exemption. The Supreme Court had declined to review the Second Circuit’s Novartis holding that pharmaceutical sales representatives do not qualify for the outside sales exemption because they do not make sales, and the District of Connecticut had recently found that Schering’s pharmaceutical sales representatives did not meet the administrative exemption test in contrast to the Third Circuit’s Johnson & Johnson decision. Now, it looks that the Supreme Court will finally enter this battle.
This morning, the Supreme Court announced that it has granted certiorari in Christopher v. SmithKline Beecham Corp., where the Ninth Circuit affirmed that Christopher, a pharmaceutical sales representative, was an “outside salesman” exempt from overtime under the FLSA. In SmithKline, the Ninth Circuit concluded that it owed no deference to the Secretary of Labor’s current interpretation of the outside sales exemption and, in fact, disagreed with the Secretary’s interpretation. This was in contrast to the Second Circuit’s Novartis decision, which adopted the Secretary’s interpretation.
The two issues on appeal are as follows:
- Whether deference is owed to the Secretary of Labor’s interpretation of the outside sales exemption and related regulations; and
- Whether the FLSA’s outside sales exemption applies to pharmaceutical sales representatives.
While I can’t read tea leaves, I wonder whether the Supreme Court decided to hear the SmithKline case because it disagrees with the Ninth Circuit’s holding. The Supreme Court had the opportunity to look at this issue with Novartis earlier this year and declined. On the other hand, with SmithKline, there is now truly a Circuit split on whether pharmaceutical sales representatives meet the outside sales exemption. I guess we will just have to wait and see how this plays out. Stay tuned.
Comments (2)
Read through and enter the discussion by using the form at the endRich Howard - November 29, 2011 9:09 AM
The inside and outside sales representative exemptions have been scrutinized in an overly narrow, academic rather than pragmatic, fashion by the DOL. What a shock. The concepts that a pharmaceutical rep does not make sales or a travel agency is not a retail enterprise is a triumph of form over substance. These reps and agents are not selling wholesale and their whole purpose is the sale of their company's product. The sales reps receive specific commissions on volume of sales to physicians they visit and/or who are in their territory. Travel agencies buy blocks of tickets from airlines and resell to the public. They are not merely brokering. Once again, the DOL takes a position that is either hypertechnical and leading directly to absurdity or simply designed to screw any and every employer they possibly can. See, Service Contract Act Regs (Overpayments of prevailing wages cannot be used to offset underpayments of fringe benefits. Geniuses, if people overpaid prevailing wages you wouldn't need the statute. Overpayments of prevailing wages are obviously intended to be payments of both.)
Thank you for this opportunity to rant about the DOL.
Staci Ketay Rotman - November 29, 2011 9:29 AM
There are many who would agree with your point of view. I guess we will have to see how the Supreme Court comes out on this issue. Thanks for following our blog!