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9th Circuit: Pharma reps are salespeople

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Typically, federal courts tend to uphold the U.S. Department of Labor’s interpretations of the Fair Labor Standards Act (FLSA). But now the 9th Circuit Court of Appeals has rejected the DOL’s interpretation of what it means to be an outside salesperson under the FLSA.

The court concluded that pharmaceutical reps who recommend prescription drugs to doctors are really outside salespeople. That makes them exempt from the FLSA’s overtime pay requirements. The DOL had claimed they were not.

Recent case: Michael Christopher and several other pharmaceutical reps worked for SmithKline Beecham, which classified them as outside salespersons exempt from overtime.

The employees claimed they worked between 50 and 60 hours per week and should have been paid overtime. They performed their jobs largely on the road, visiting doctors’ offices. Their primary job responsibility had been to persuade doctors to commit to prescribing SmithKline products. Their compensation was based on commissions.

The employees claimed that they didn’t actually sell drugs. Nor did they take orders for the company to fill.

Thus, they argued, they didn’t fit the definition of outside salesperson, an interpretation consistent with the DOL’s views.

The 9th Circuit Court of Appeals disagreed and dismissed the case. The reasoning: Under the unique circumstances of pharmaceutical sales, even if reps don’t directly sell products or services or take orders like other salespeople, their job duties are close enough. (Christopher, et al., v. SmithKline Beecham, No. 10-15257, 9th Cir., 2011)

Final note: Regularly review how your employees are classified. When job duties change, employees’ exempt/nonexempt classification can change, too.

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