SCOTUS will hear FLSA pharma sales rep case
November 28, 2011 by Ross Runkel at LawMemo
The case appears to be about whether the Fair Labor Standards Act's outside sales exemption applies to pharmaceutical sales representatives - that is, whether these representatives are unable to claim FLSA overtime.
Yet the issue of more lasting interest - and the issue that ought to attract the Court's interest - is whether deference is owed to the Secretary of Labor's interpretation of the Fair Labor Standards Act's outside sales exemption and related regulations.
Regarding the deference issue, here is how the Respondent, SmithKline, put it in their brief:
During most of the more than 70 years since enactment of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., pharmaceutical companies have employed pharmaceutical sales representatives and, consistent with Department of Labor regulations first promulgated in 1940 and reaffirmed as recently as in 2004 defining the term “sales” broadly, classified those sales representatives as exempt from the FLSA’s overtime pay requirements under the “outside sales” exemption, 29 U.S.C. § 213(a)(1). In 2009, the Department began filing amicus briefs in private civil litigation announcing its new position that sales representatives are not now and have never been exempt because they do not “sell” as that term is defined in Section 3(k) of the FLSA, 29 U.S.C. § 203(k). The United States Court of Appeals for the Ninth Circuit refused to defer to that abrupt change in position and held that sales representatives are exempt.
Christopher, a pharmaceutical sales representative (PSR), sued the employer for violation of the Fair Labor Standards Act (FLSA) alleging failure to pay overtime. The trial court granted the employer's motion for summary judgment and denied Christopher's motion to amend the judgment based on the trial court's failure to consider an amicus brief filed by the Secretary of the Department of Labor (DOL). The 9th Circuit affirmed. The issue on appeal was whether Christopher was an "outside salesmen" exempt from the FLSA's overtime-pay requirement. The court found he was exempt.
With respect to the Secretary's appearance as amicus supporting Christopher, the court concluded it owed no deference to the Secretary's current interpretation of the regulations and disagreed with that interpretation. The court found the regulations merely "parrot" section 3(k) of the FLSA and, as such, acquired no special authority by paraphrasing the statutory language. Gonzales v. Oregon, 546 US 243, 257 (2006). In view of many similarities between PSRs and salespeople in other fields, pharmaceutical industry norms, and the acquiescence of the Secretary over the last seventy-plus years, the court could not accord even minimal Skidmore deference to the position expressed in the amicus brief.
[In contrast to the 9th Circuit, the 2nd Circuit adopted the Secretary's position that PSRs did not meet the requirements of the outside sales exemption "when an employee promotes to a physician a pharmaceutical that may thereafter be purchased by a patient from a pharmacy ... the employee does not in any sense make a sale." In re Novartis Wage & Hour Litig., 611 F3d 141 (2d Cir. 2010).]
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