The Supreme Court of the United States issued an opinion today in Christopher v. SmithKline Beecham Corp., affirming, in a 5-4 decision, the Court of Appeals for the Ninth Circuit's holding that SmithKline Beecham does not have to pay overtime to its pharmaceutical sales representatives. The Supreme Court found that pharmaceutical sales representatives, who visit doctors' offices to discuss pharmaceutical products and obtain nonbinding commitments to prescribe those pharmaceuticals, are "outsides sales people" exempt from the overtime pay requirements of the Fair Labor Standards Act ("FLSA").
The FLSA generally requires employers to pay employees overtime pay, but includes limited exemptions for certain employee classifications, including "outside salesmen." In Christopher, the Court analyzed whether pharmaceutical sales representatives made sales within the meaning of the FLSA or merely promoted products to doctors. The Court, rejecting the Department of Labor's narrow interpretation of the exemption as "quite unpersuasive," utilized a functional inquiry into the employees' duties and responsibilities in the context of the pharmaceutical industry's "unique regulatory environment" and concluded that the employees made sales as contemplated by the FLSA. The Court also reasoned that pharmaceutical sales representatives, who are typically well-compensated, were "hardly the kind of employees that the FLSA was intended to protect." The Court therefore concluded that the employees were exempt from the FLSA's overtime requirement.
In light of this decision, employers should review their classification of employees under the FLSA.