Litigation

Ninth Circuit holds that pharmaceutical sales reps aren't entitled to overtime pay

By Shemia Fagan

Last month, in Christopher v. SmithKline, the Ninth Circuit held that pharmaceutical sales representatives are exempt from the Fair Labor Standard Act's overtime requirements. 

Two pharmaceutical sales representatives filed a lawsuit challenging defendant's practice of requiring overtime work without paying additional compensation, as a violation of the FLSA.  The FLSA requires overtime payment for employees for hours worked in excess of forty per week.  However, there are numerous exceptions to this rule, including an exemption for persons employed "in the capacity of outside salesman." The trial court did not allow the plaintiff's case to proceed to trial, finding that pharmaceutical sales representatives "unmistakably fit within the terms and spirit of the [FLSA's outside sales] exemption."  The plaintiffs appealed to the Ninth Circuit.

The Ninth Circuit affirmed the trial court's ruling.  Despite the fact that PSRs do not technically sell pharmaceuticals to doctors, a doctor's commitment to a PSR to prescribe his assigned product when medically appropriate is a "meaningful exchange."  This meaningful exchange, the Court held, fits within the FLSA's definition of a "sale," which includes "other dispositions."  In addition, PSRs are "rewarded with commissions when their efforts generate new sales.  They receive commissions in lieu of overtime and enjoy largely autonomous work-life outside of an office."  For these reasons, the Ninth Circuit Court held that PSRs are exempt from the overtime-pay requirement of the FLSA.

This result creates a split with the Second Circuit, and raises the possibility that the U.S. Supreme Court will take up the issue.

Full post as published by Northwest Business Litigation Blog on March 14, 2011 (boomark / email).