SUPREME COURT RULES THAT SALES REPRESENTATIVES ARE EXEMPT FROM OVERTIME PAY
In a case that may impact medical device companies and their sales representatives, the U.S. Supreme Court has ruled that pharmaceutical sales representatives are exempt from the minimum wage and overtime pay requirements of the Fair Labor Standards Act (the "FLSA"). The FLSA requires employers to pay minimum wage and provide overtime pay to certain employees, subject to certain exemptions, including the exemption for those employees classified under the statute as "outside salesmen."
Like medical device companies, pharmaceutical companies have long applied the FLSA exemption for "outside salesmen" to their sales representatives, paying them a mix of salary and performance-based commissions or bonuses. In 2009, the Department of Labor (the "DOL") first announced its view that pharmaceutical sales representatives are not "outside salesmen" because in the DOL’s view, pharmaceutical sales representatives do not make sales, but instead obtain from physicians nonbinding commitments to prescribe products. According to the DOL, sales representatives therefore are not "outside salesmen."
The Supreme Court rejected the DOL’s position, holding that the position was not entitled to deference, in part because it was announced in amicus briefs, rather than through formal rulemaking. The Court also held that while pharmaceutical representatives are legally barred from making sales, their role and function is similar to other salespeople and therefore they are exempt from the FLSA’s overtime pay requirement.
Read the full text of Christopher v. Smithkline Beecham Corp., No. 11-204, U.S. Supreme Court.
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