A recent article in The Wall Street Journal discussed the Supreme Court’s decision to hear a case regarding whether pharmaceutical sales representatives are entitled to overtime pay. The Court agreed to consider whether drugmakers must pay overtime to as many as 90,000 sales representatives, heeding calls from both sides for review of what may turn into a multibillion-dollar case. The decision will impact the pharmaceutical industry specifically but could have important implications for employers in general.
The Court announced Monday that they would consider the February 2011 decision by the Ninth Circuit Court of Appeals in San Francisco in Christopher vs. SmithKline Beecham. In Christopher, the appellate court ruled that GlaxoSmithKline’s pharmaceutical sales representatives are exempt under the Fair Labor Standards Act of 1938 and thus not required to be paid overtime.
There has been a split in the circuits as the July 2010 decision in In re Novartis Wage & Hour Litigation, before the Second Circuit Court of Appeals, indicates. In that case, the Court in New York ruled pharmaceutical sales representatives are not exempt from overtime. The two suits are among the more than a dozen similar cases that have been filed against drugmakers, including Johnson & Johnson, Bristol-Myers Squibb Co. and units of Novartis AG and Merck & Co. With federal appeals courts divided on the issue, business trade groups joined the Glaxo salespeople to urge Supreme Court review.
The Supreme Court announced that two issues would be considered when hearing the case: 1) whether deference is owed to the Secretary of Labor’s interpretation of the Fair Labor Standards Act’s outside sales exemption and related regulations; and 2) whether the FLSA’s outside sales exemption applies to pharmaceutical sales representatives.
One Pennsylvania attorney is quoted by The Wall Street Journal as saying that the 9th Circuit “took a practical view of what the sales reps do and said, ‘Yes, they are really engaged in selling pharmaceuticals.’ The 2nd Circuit said, ‘No, they’re not, because the doctors don’t buy anything. All they do is write prescriptions.’”
However the Court rules it will impact future cases. If the Supreme Court decides to give deference to the DOL’s interpretation of this particular outside sales exemption then it could increase the power of the DOL to shape the law through amicus briefs in the future.
On the other hand, if the Supreme Court rules there should not be deference given to the DOL’s position, then it is possible that the DOL will take a second look before they decide to weigh in on other future disputes.
The ruling would not be limited to the pharmaceutical industry but could instead apply across the board to industries that have sales-related employees. The decision might also be felt by employees who are in positions where they travel during the work day and make use of cellphones and emails outside their standard work hours, and thus fall into that gray, or semi-gray, area between exempt and non-exempt.
The justices will hear arguments and rule by the middle of next year.
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