U.S. Supreme Court

Pharmaceutical Sales Reps Lose OT Quest in Supreme Court; Decision a 'Rebuke' to Labor Department

The U.S. Supreme Court ruled today against pharmaceutical sales representatives who contended they were entitled to overtime pay.

In a 5-4 opinion (PDF), the court said in Christopher v. SmithKline Beecham Corp. that the sales representatives qualify as outside salespeople who are not entitled to the extra pay under the Fair Labor Standards Act. The sales reps had argued they weren’t salespersons because they promoted products, but didn’t actually sell them.

Forbes calls the decision “a rebuke to the Obama administration,” which had supported the sales reps. The decision “could help stem the tide of wage-and-hour cases that have seen courts award overtime to such traditionally exempt employees as stockbrokers and loan officers,” the story says. One of pharmaceutical reps in the Christopher case made more than $72,000 a year, while the other made more than $76,000.

Justice Samuel A. Alito Jr. wrote the majority opinion. The department’s interpretation of the regulations is “quite unpersuasive,” Alito said, and it “lacks the hallmarks of thorough consideration.”

Nor is the Labor Department opinion entitled to deference, Alito said. He noted that the U.S. Department of Labor didn’t announce its support for pharmaceutical sales reps seeking overtime pay until 2009, when it filed an amicus brief in a different case.

Deferring to the agency interpretation would reach conduct that occurred before the position was announced and undermine the principle of fair warning, Alito said. He also noted that the Labor Department had not brought any enforcement actions challenging the practice. “Where, as here, an agency’s announcement of its interpretation is preceded by a very lengthy period of conspicuous inaction, the potential for unfair surprise is acute,” he said.

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