This week the U.S. Supreme Court issued a decision in Christopher v. SmithKline Beecham, a case which has been closely followed by employers. Among the issues in the case was whether pharmaceutical sales representatives could be regarded as outsides sales employees, and therefore exempt from the FLSA’s overtime pay requirements. The plaintiffs along with the U.S. Department of Labor claimed that since these employees were unable to “sell” per FDA regulations, and since they did were not involved in a transaction in which title changed, they could not be deemed outside sales employees.
In a 5-4 decision, the Court rejected these contentions and concluded that the statute’s exemption should be read in a more “functional” as opposed to a “formal” manner as to what the job entails, and by doing so, concluded that the pharmaceutical representatives were exempt outside sales employees. While doing so, the Court also noted that the manner in which the DOL asserted its construction of the law during the course of the litigation deserved little, if any, deference.
This decision is clearly significant to the pharmaceutical industry, but the Court’s consideration of “functional” and more pragmatic constructions of the law may also be useful to all employers as they strive to adhere to the FLSA’s requirements. The Court’s unwillingness to defer to the DOL’s interpretation also may serve to help employers as they battle similar issues with the DOL.
Susan Eisenberg of Akerman Senterfitt’s Miami office, and a Member of the Wage & Hour Defense Institute, has prepared as review of this case entitled “The Supreme Court Delivers a Decision for Employers.” Other WHDI Members are discussing this new case at various seminars and other programs across the country.
As indicated in Paul Bittner’s posting last week (June 11, 2012), the Seventh Circuit Court of Appeals in Schaefer-LaRose v.Eli Lilly found that pharmaceutical sales representatives may also be considered exempt under the administrative exemption of the FLSA. Thus, employers who have for many years, and without any objection from the DOL for many years, treated these employees as either administratively or outside sales exempt have been given a major reason to sigh relief and negate massive back-pay exposure and retain pay structures that seem to make sense for that industry. While these employers have helped create good precedent for employers under the FLSA, though, employers need to be cognizant that some state laws have outside sales and administrative employee exemptions are not identical to those in the FLSA, or have state court interpretations of the state law exemption that are arguably dissimilar to the result reached by the Supreme Court in the SmithKline case. Consequently, employers in those states may have to take a different approach to comply with state law.