Friday, December 9, 2011

Supreme Court to rule on whether pharmaceutical sales reps are entitled to overtime

The US Supreme Court is entering the debate on whether pharmaceutical sales representatives, also known as PSRs, are "outside salesman" entitled to overtime pay under the Fair Labor Standards Act.

The Supreme Court will be reviewing Christopher v. SmithKline Beecham Corp. and a Ninth Circuit ruling that found PSRs who promote pharmaceutical products to physicians fall within the scope of the outside sales exemption to the FLSA's overtime-pay requirement. The outside sales exemption means that you do not have to pay overtime to "any employee employed in a bona fide executive, administrative, or professional capacity ... or in the capacity of outside salesman (as such terms are defined and delimited from time to time by regulations of the Secretary of Labor).... " An "outside salesman" is defined as "any employee: (1) Whose primary duty is: (i) making sales within the meaning of section 3(k) of the Act; or (ii) obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and (2) Who is primarily and regularly engaged away from the employer's place or places of business in performing such primary duty."

In Christopher v. SmithKline Beecham Corp., the Ninth Circuit rejected Plaintiff salesmens' contention that they did not "sell" to doctors, based on a federal law that prohibits direct selling to patients. The Court disagreed, noting that the PSRs were clearly selling to doctors, not patients. "Plaintiffs suggest that despite being hired for their sales experience, being trained in sales methods, encouraging physicians to prescribe their products, and receiving commission-based compensation tied to sales, their job cannot 'in some sense' be called selling." Interestingly, and at issue before the Supreme Court, is the fact that the Department of Labor classifies PSRs as promoters, not salesmen.

The conflict between Department of Labor laws and the FLSA definition is at the heart of this dispute. The confusion, unfortunately, is not uncommon, and unraveling the tangled web of labor and employment laws leaves many employers scratching their heads. If you are unsure whether your employees are exempt or nonexempt, consulting an attorney can save you thousands of dollars in unplanned wage and hour penalties.

As a disclaimer, this information is offered as a service to clients and the community, and is not intended as legal advice or advertisement. No attorney client relationship is inferred or intended. Every case is different, and you should seek legal advice from a licensed attorney.

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