Supreme Court To Decide Significant Case On The Outside Sales Overtime Exemption

Earlier this week, GlaxoSmithKline PLC (Glaxo), formerly known as SmithKline Beecham Corporation, filed its brief in the U.S. Supreme Court in Christopher v. SmithKline Beecham Corporation, one of the only Supreme Court cases to address the overtime exemptions under the Fair Labor Standards Act (FLSA), and the first to address the criteria for the outside sales exemption. At issue is whether pharmaceutical sales representatives (PSRs) qualify for the outside sales exemption because pharmaceuticals are generally purchased by end-users at pharmacies, which purchase from wholesale distributors. The Court's decision may have far-reaching implications, not only for the pharmaceutical industry, but also for other industries that depend on representatives to call on customers at their place of business to generate sales, although the actual sales orders are placed by customers through a centralized order and distribution center or similar process. The case is also significant because it may determine the extent to which courts are required to defer to U.S. Department of Labor's (DOL) changing interpretations of federal employment statutes and regulations.

Petitioners' Position

Petitioners Michael Shane Christopher and Frank Buchanan (Petitioners), former SmithKline PSRs, are seeking to reverse the Ninth Circuit Court of Appeals' decision1 holding that: (1) Glaxo's PSRs were properly classified as exempt under the "outside sales" exemption, and (2) the court was not required to defer to the DOL's amicus brief, on behalf of petitioners, interpreting the exemption.

PSRs Do Not Actually Sell

First, as to the outside sales exemption, Petitioners argue that PSRs are not engaged in sales because they do not actually sell Glaxo products to anyone. Rather, Petitioners argue, PSRs "promote" Glaxo products to healthcare providers. Petitioners claim that PSRs "provide medical professionals who prescribe pharmaceuticals with the 'details' of pharmaceutical products, seeking to educate the prescribers with the ultimate goal of influencing their prescribing decisions." Petitioners also rely heavily on the fact that PSRs are prohibited by federal law from actually selling pharmaceuticals. Moreover, Petitioners attempt to set the theme for their argument by throughout their brief repeatedly referring to PSRs as "detailers" (an antiquated term in the industry with far fewer sales-related connotations).

Courts Should Defer to the DOL's Position

Second, Petitioners argue that the Ninth Circuit erred by not deferring to the DOL's regulations, and actually "usurped the role that Congress assigned to the Department of Labor." Petitioners argue that, in its regulations, the DOL expressly defined an "outside salesman" as an "employee with the 'primary duty' of 'making sales,'" and that the DOL purposefully drew a...