Pharmaceutical sales representatives are not eligible for overtime pay ruled the United States Supreme Court.
In a 5-4 decision announced Monday, the court said that employers of pharmaceutical sales representatives are not required to pay overtime as specified in the Fair Labor Standards Act (FLSA) if their sales reps work more than 40 hours a week.
The Supreme Court ruling is being seen as a victory for the drug industry.
“PhRMA strongly supports the Supreme Court’s decision on Christopher v. SmithKline Beecham,” said Matthew Bennett, senior vice president of the Pharmaceutical Research and Manufacturers of America (PhRMA), in a statement to Healthcare Finance News. “The Supreme Court’s opinion is consistent with the arguments advanced in our amicus brief and with the longstanding sales practices of our member companies.”
As PhRMA, a nonprofit association representing research-based pharmaceutical and biotechnology companies, pointed out in its amicus brief to the court, a court ruling that outside sales representatives are not exempt from FLSA’s overtime pay regulation would have been devastating to the pharmaceutical industry.
“A ruling that (outside sales representatives) are not exempt would expose PhRMA’s members to the risk of staggering retrospective liability and could require them to restructure their sales operations in ways that would adversely affect not only PhRMA’s members, but also the tens of thousands of (outside sales representatives) they employ ….”
In the court’s majority opinion, Justice Samuel Alito indicated that overtime pay does not apply to outside salespeople per the FLSA. After concluding that the petitioners – Michael Christopher and Frank Buchanan – were employed by SmithKline Beecham as outside salespeople, the court ruled that the company was not obligated to pay them overtime.
“That petitioners bear all of the external indicia of salesmen provides further support for our conclusion,” Alito wrote. “Petitioners were hired for their sales experience. They were trained to close each sales call by obtaining the maximum commitment possible from the physician. They worked away from the office, with minimal supervision, and they were rewarded for their efforts with incentive compensation. It would be anomalous to require respondents to compensate petitioners for overtime, while at the same time exempting employees who function identically to petitioners in every respect except that they sell physician-administered drugs, such as vaccines and other injectable pharmaceuticals, that are ordered by the physician directly rather than purchased by the end user at a pharmacy with a prescription from the physician.”
Justice Stephen Breyer, writing the dissent for himself and justices Ruth Bader Ginsburg, Elena Kagan and Sonia Sotomayor, said he believed Christopher and Buchanan were sales promotion men who sought to bring about not their own sales but sales by others, which didn’t make them outside salespeople and therefore they were eligible for overtime pay.