The Fair Labor Standards Act's (the "Act") outside salesperson exemption has been a hotly contested issue for many years. To qualify for this overtime exemption under the Act, an employee's primary duty must be "making sales" and the employee must be "customarily and regularly" engaged in making sales outside the employer's place of business. Employers and plaintiffs have clashed over the types of duties that meet the criteria -- including whether individuals who lay the groundwork for a product's sale are, in fact, salespersons.
On June 18, 2012, the United States Supreme Court in Christopher v. GlaxoSmithKline Beecham provided guidance on this issue and handed employers a victory. In Christopher, two former GlaxoSmithKline pharmaceutical sales representatives filed a class-action lawsuit claiming that they were not paid for hours they worked each week outside the normal business day. Their jobs required them to meet with doctors in their offices to pitch Glaxo products, but also to attend conventions, dinners, and golf outings. GlaxoSmithKline argued that their job duties and work away from the employer's business exempted them from overtime pay, whereas the employees claimed that since they were not actively involved in the product sale, they should receive overtime pay.
In a split 5-4 decision, the High Court held that the former employees qualify as outside salespersons and were therefore exempt from overtime. Justice Alito, writing for the majority, said that the "'drug sales representatives' end goal was not merely to make physicians aware of the medically appropriate uses of a particular drug. Rather, it was to convince physicians actually to prescribe the drug in appropriate cases" -- thus making them sales representatives. "For these reasons, we conclude that petitioners qualify as outside salesmen under the most reasonable interpretation of the DOL's regulations."
This decision has broad implications for employers with outside sales employees. Certain employers may now have more leeway with employees who establish relationships with customers, even though no actual sale occurs at the time.
California employers should be aware, however, that applicable Wage Orders apply a different standard and may be more restrictive. Employers should review their employees' job duties and consult counsel to determine whether they may qualify for the exemption under state and federal laws.
The case is Christopher v. GlaxoSmithKline Beecham.