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Christopher v. SmithKline Beecham Corp.  (11-204) 
  Pharmaceutical sales representatives
are FLSA exempt as outside salesmen (5-4); DOL's interpretation given no deference 

Decided June 18,  2012  
[Opinion full text

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Christopher, a pharmaceutical sales representative, 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 US Supreme Court affirmed (5-4).

The job of a pharmaceutical sales representative is to try to persuade physicians to write prescriptions for products in appropriate cases. For over 70 years DOL acquiesced in an interpretation that they were "outside salesmen" who are exempt from FLSA overtime requirements. In amicus briefs filed in Circuit courts DOL took the position that a "sale" requires a "consummated transaction." In Supreme Court briefing DOL's position that there is no "sale" unless the employee "actually transfers title."

The Court said that the DOL's new interpretation is entitled to no deference at all because it would impose massive liability for conduct that occurred before the interpretation was announced, there had been no enforcement actions suggesting the industry was acting unlawfully, DOL gave no opportunity for public comment, and the interpretation is "flatly inconsistent" with the FLSA.

The FLSA definition of "sale" includes consignments, which do not involve a transfer of title. Although DOL regulations say that sales include the transfer of title, that does not mean a sale must include a transfer of title. The regulations also use the phrase "other disposition" which - in this unique regulatory environment - includes the work of pharmaceutical sales representatives. The representatives also bear all the exterior indicia of salesmen (average salaries exceeding $70,000, work that is difficult to standardize to a particular time frame, etc.)

The DISSENT reasoned that sales of drugs are made by pharmacists, not pharmaceutical sales representatives. The pharmaceutical sales representative neither make sales nor promote "their own sales." (The dissent agreed that the DOL's current views expressed in briefs are not entitled to any weight.)

Case below:  Christopher v. SmithKline Beecham Corp (9th Cir 02/14/2011) 
Official docket sheet 
Certiorari granted: November 28, 2011. 
Oral argument: Monday, April 16, 2012. 

Questions presented in petition for certiorari:   

The outside sales exemption of the Fair Labor Standards Act exempts from the overtime requirements of the Act "any employee employed... in the capacity of outside salesman (as such terms are defined and delimited from time to time by regulations of the Secretary .)." 29 U.S.C. § 213(a)(1). The Secretary of Labor has implemented various regulations that "define and delimit" the outside sales exemption and, filing as amici in this and other related matters, has interpreted these regulations to find the exemption inapplicable to pharmaceutical sales representatives. A split exists between the Second and Ninth Circuits concerning whether this interpretation is owed deference and whether the outside sales exemption of the Fair Labor Standards Act applies to pharmaceutical sales representatives. 

The questions presented are: 

(1) Whether deference is owed to the Secretary’s interpretation of the Fair Labor Standards Act’s outside sales exemption and related regulations; and 

(2) Whether the Fair Labor Standards Act’s outside sales exemption applies to pharmaceutical sales representatives. 

Briefs on the merits: 

Certiorari Documents: 

Counsel:

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