|Supreme Court Decision that Pharma Sales Reps are Exempt from Overtime Impacts More than Wage & Hour|
By: David S. Fortney
In Christopher v. SmithKline Beecham Corp., the Supreme Court, by a vote of five-to-four, affirmed the decision of the U.S. Court of Appeals for the Ninth Circuit, holding that pharmaceutical sales representatives qualify as outside salesmen under federal wage and hour law-the Fair Labor Standards Act (FLSA) and its regulations, as interpreted by the U.S. Department of Labor (DOL). In its decision announced June 18, the Court in Christopher rejected DOL's view that was announced beginning in 2009, that these sales employees were entitled to overtime, based on a change in DOL's interpretation of its FLSA regulations. Although the ruling directly applies to pharmaceutical sales employees, the decision also provides guidance in determining whether other employees may be exempt from the overtime under the FLSA's outside sales exemption.
In addition to the changes in the DOL's interpretations of the FLSA regulations challenged in Christopher, since 2009, the DOL has embarked on a number of policy and enforcement changes that have been announced through audit and enforcement proceedings. DOL often has attempted to impose retroactive liabilities based on these changed views. Christopher sets a powerful precedent against such "unfair surprise" interpretations and attempts by DOL and other agencies to improperly impose retroactive liabilities. We anticipate that employers may raise arguments and defenses based on Christopher in response to a number of DOL actions that are not premised on legally-sound rulemaking and the resulting announcement of prospective changes. Ultimately, the impact of this decision promises to go well beyond the rejection of DOL's interpretation of its wage and hour regulations.