Pharmaceutical Sales Reps Not Entitled to Overtime Pay
Traditionally, pharmaceutical sales reps were not paid overtime when they worked more than 40 hours per week. A lawsuit that went up to the U.S. Supreme Court challenged that practice, claiming that the drug company GlaxoSmithKline was violating the Fair Labor Standards Act (FLSA) by not paying overtime to its sales reps. The Supreme Court, however, disagreed, ruling in a 5-4 decision on June 12 that pharmaceutical sales reps are employed as outside sales people, a job category that is exempt from overtime-pay requirements under a Department of Labor (DOL) regulation.
The Court split along familiar lines. Justice Alito wrote the majority opinion, joined by Justices Roberts, Scalia, Kennedy and Thomas. Justice Breyer wrote the dissent, joined by Justices Ginsburg, Sotomayor and Kagan. The majority rejected the DOL’s argument, put forth in its amicus briefs in this case, that the reps are not engaged in outside sales, stating that “[w]e find the DOL’s interpretation of its regulations quite unpersuasive.” The decision also stated that the sales reps, who earned an average of more than $70,000 per year, “are hardly the kind of employees that the FLSA was intended to protect,” and that “it would be challenging, to say the least, for pharmaceutical companies to compensate [pharmaceutical sales reps] for overtime going forward without significantly changing the nature of that position.”
Had the decision gone the other way, it could have cost the prescription-drug industry billions of dollars. The decision is expected to affect all of the 90,000 people working as drug reps in the U.S. Its reach could go even further. Some observers think that the decision “may check aggressive DOL enforcement efforts into gray areas of wage-and-hour law” in general.
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