United States Supreme Court Holds Pharmaceutical Sales Representatives Are Not Entitled to Overtime Pay

In Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156 (2012), the United States Supreme Court concluded that under the federal Fair Labor Standards Act (FLSA), the plaintiffs, pharmaceutical sales representatives (PSR) who spent much of their time meeting with physicians and encouraging them to prescribe the defendant’s pharmaceutical products to their patients, were not entitled to overtime pay.

Under the FLSA, employers are not required to pay overtime to employees who are “outside salesmen,” defined as any employee (1) “[w]hose primary duty is: (i) making sales within the meaning of section 3(k) of the Act; or (ii) obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and (2) [w]ho is primarily and regularly engaged away from the employer’s place or places of business in performing such primary duty.”  Id. at 2175.

The Court concluded that in this case, even though the plaintiffs were not “making sales” in the sense that they did not exchange products for money, in this industry, “[o]btaining a nonbinding commitment from a physician to prescribe one of respondent’s drugs is the most that petitioners were able to do to ensure the eventual disposition of the products that respondent sells,” and this arrangement passes muster under the FLSA with respect to the outside salesmen exemption.  Id. at 2172.

Although this decision is favorable to employers in the pharmaceutical sales industry, California employers in this industry must keep in mind that the outside salesperson exemption under federal law differs from California law.  Namely, California defines “outside salesperson” as “any person, 18 years of age or over, who customarily and regularly works more than half the working time away from the employer’s place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities.”  Wage Order 4-2001, Section 2(M).  Consequently, California employers in the pharmaceutical sales industry should ensure that their sales representatives meet each of these requirements before classifying them as exempt employees.

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Bernstein & Friedland, P.C. is a boutique employment law firm in Los Angeles specializing in wrongful termination, discrimination, harassment, retaliation, and unpaid wage and overtime matters.  Please visit our website at www.laemploymentcounsel.com to learn more about us.

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