Supreme Court to Hear Arguments on Outside Sales Exemption

The Supreme Court today agreed to hear a Fair Labor Standards Act case to decide if drug company reps should qualify for the outside sales exemption. Specifically, Christopher v. SmithKline Beecham Corp. is about whether pharmaceutical sales reps working more than 40 hours in a week are eligible for overtime under the FLSA.

A key question for the court to decide: Can an employee who appears to never make a sale be an outside salesman? The FLSA exempts from its minimum wage and overtime requirements any “employee employed in the capacity of outside salesman” (29 U.S.C. §213(a)(1)).

Pharmaceutical sales representatives who try to persuade doctors to prescribe certain drugs do not actually make “sales” and thus do not qualify for the FLSA’s outside sales exemption, according to the U.S. Department of Labor.

DOL filed a friend-of-the-court brief more than a year ago urging the 9th U.S. Circuit Court of Appeals to reverse a district court’s ruling in Christopher v. SmithKline Beecham Corp. That appeals court found that pharmaceutical sales reps did qualify as outside salespeople. While the sales reps in question provide information to doctors with the goal of convincing them to prescribe the company’s drugs, the actual sale of drugs takes place between the company and pharmacies, DOL said, and the sales reps are in fact prohibited from making direct sales.

The court is expected to hear the case between February and April 2012.

The ruling may have affect sales professionals outside of the pharmaceutical industry.  The 10th Cir., for instance, a number of years ago found that military recruiters were not exempt as outside salespeople because they could not sign the recruits to contracts. “These people too were involved in ‘selling’ something — that is the idea of Army service to teenagers — and they should have been found to be exempt,” said Shlomo Katz, counsel in the Washington, D.C. office of Brown Rudnick, LLP.