Ninth Circuit Holds Pharmaceutical Sales Representatives Fall Within FLSA Exemption for “Outside Salesmen”

The U.S. Court of Appeals for the Ninth Circuit recently affirmed summary judgment in favor of pharmaceutical company GlaxoSmithKline (“GSK”) in a case brought by former pharmaceutical sales representatives (PSRs) who claimed that GSK violated the overtime provisions of the Fair Labor Standards Act (FLSA) by failing to pay them overtime.  The court determined that the plaintiffs fell within the FLSA’s overtime exemption for “outside salesmen.”  Christopher v. SmithKline Beecham Corp. DBA GlaxoSmithKline, No. 10-15257 (9th Cir. Feb. 14, 2011).

 The plaintiffs claimed that their job duties, which essentially consisted of visiting doctors to persuade them to prescribe particular drugs to patients, did not qualify for the outside sales exemption because their activities did not actually involve “sales.”  They argued that it was the patients who were prescribed the drugs who were the actual buyers, and not the doctors who did the prescribing.  The Ninth Circuit rejected this argument, holding that the PSRs were involved in “sales” within the meaning of the FLSA, because by convincing doctors to prescribe the drugs the PSRs’ activities resulted in increased sales.

In affirming summary judgment in favor of GSK, the court declined to give deference to a brief filed by the U.S. Department of Labor supporting the PSRs’ position.

The Ninth Circuit’s decision that the outside sales exemption applies to PSRs creates a split in the circuits, because in July 2010 the Second Circuit adopted the Department of Labor’s position and held that PSRs do not fall under the FLSA exemptions for either administrative or outside sales employees.  In re Novartis Wage & Hour Litig., 611 F.3d 141 (2d Cir. 2010).  The U.S. Supreme Court recently denied petitions to review the Second Circuit’s decision on that issue.  As a result, the circuit split will continue indefinitely. 

The Ninth Circuit covers the states of Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.  The Second Circuit covers the states of Connecticut, New York and Vermont.

Aaron A. Buckley – Paul, Plevin, Sullivan & Connaughton LLP – San Diego, CA

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