Today brings a bonus second post, because the Supreme Court just released its long-awaited ruling in Christopher v. SmithKline Beecham Corp. [pdf] The Supreme Court, by a 5-4 margin, held that pharmaceutical sales representatives are exempt, outside salespeople to whom employers need not pay overtime.
For all of the background on this case you could want, click through the following from my archives:
- Supreme Court to hear case on scope of outside sales exemption (and hopefully scope of DOL’s power)
- 2nd Circuit issues groundbreaking ruling on sales reps and overtime payments
- Do you know? The FLSA’s exemptions for salespeople
In summary, the Court concluded the following:
1. To be considered a salesperson, one need to actually consummate a transaction. It is sufficient that the promotional work performed by the employee can lead to a sale.
This rationale rebukes the argument of the Department of Labor, which the Court called “quite unpersuasive” and lacking the hallmarks of thorough consideration.”
2. Non-binding commitments from physicians to prescribe certain drugs qualify as sales under the FLSA’s outside sales exemption.
This rationale applies a common-sense approach to a statute that is often confusing and too rigidly applied.
To me, the following is the million dollar quote from the Court:
Our holding also comports with the apparent purpose of the FLSA’s exemption for outside salesmen. The exemption is premised on the belief that exempt employees “typically earned salaries well above the minimum wage” and enjoyed other benefits that “set them apart from the nonexempt workers entitled to overtime pay.” … It was also thought that exempt employees performed a kind of work that “was difficult to standardize to any time frame and could not be easily spread to other workers after 40 hours in a week, making compliance with the overtime provisions difficult and generally precluding the potential job expansion intended by the FLSA’s time and-a-half overtime premium.” … Petitioners—each of whom earned an average of more than $70,000 per year and spent between 10 and 20 hours outside normal business hours each week performing work related to his as signed portfolio of drugs in his assigned sales territory—are hardly the kind of employees that the FLSA was intended to protect. And it would be challenging, to say the least, for pharmaceutical companies to compensate detailers for overtime going forward without significantly changing the nature of that position.
I have long argued that the FLSA is an anachronistic maze of rules and regulations that does not well fit within the realities of the 21st century workplace. It seems that at least 5 members of the Supreme Court are inclined to agree with me. This excerpt provides hope for businesses that in the face of an overly-active Department of Labor and an overly confusing statute, courts can provide relief by adopting common sense interpretations.
For more on this important SCOTUS ruling, you can read the early reactions of some of my blogging friends (I’m certain more of the employment law blogging illuminati will weigh in today and tomorrow):