Recent Supreme Court Case - Pharmaceutical Sales Reps Exempt from FLSA Minimum Wage and Overtime

On June 18, 2012, the United States Supreme Court resolved a split between circuit courts and held that pharmaceutical sales reps engage in “sales” and therefore are exempt under the Fair Labor Standards Act (FLSA). Under the FLSA, “outside salespersons” are exempt from minimum wage and overtime.  The issue for the Supreme Court was whether pharmaceutical reps “sell” drugs to doctors or whether they merely obtain a promise from the doctor to prescribe their employer’s pharmaceutical products.

Plaintiffs argued that because the pharmaceutical rep makes no actual “sales” he/she should not be considered a salesperson.  Plaintiff argued that these reps should be treated as “promoters” and should therefore be entitled to minimum wage and overtime payments.The Department of Labor filed an amicus brief on behalf of the Plaintiffs and took the position that pharmaceutical reps were non-exempt because “[a]n employee does not make a ‘sale’ for purposes of the ‘outside salesman’ exemption unless he actually transfers title to the property at issue.”

The Supreme Court refused to accept the DOL’s interpretation reasoning that such an interpretation would remove from the exemption many sales persons who previously were exempt, and that it was much narrower than regulations and prior case law.

The decision was 5-4.  The dissent agreed that the DOL’s interpretation was not worth much thought that the duties performed by pharmaceutical reps do not amount to "sales" but are promotion activities and are therefore non-exempt.

The case is Christopher v. Smithkline Beecham:  http://www.supremecourt.gov/opinions/11pdf/11-204.pdf

Please contact us if you have any questions about minimum wage or overtime pay.