On February 14, 2011, the United States Court of Appeals for the Ninth Circuit ruled that pharmaceutical sales representatives are not entitled to overtime pay under the Fair Labor Standards Act of 1938 (“FLSA”). Christopher v. SmithKlineBeecham Corp., No. 10-15257 D.C. No. 2:08-cv-01498-FJM (9th Cir. Feb. 14, 2011). The plaintiffs, two sales representatives, argued that their employer required them to work overtime hours without providing them with overtime compensation as required by the FLSA. The defendant, GlaxoSmithKline, asserted in part that a sales representative is not subject to the FLSA’s overtime-pay requirements because he or she falls under the “outside salesman” exemption. The Ninth Circuit agreed with GlaxoSmithKline and found that sales representatives are exempt from the FLSA. The Court concluded that “[t]he pharmaceutical industry’s representatives – detail men and women – share many more similarities than differences with their colleagues in other sales fields, and we hold that they are exempt from the FLSA overtime-pay requirement.” Id. at slip. op. 2331, 2363. In making this decision, the Court noted that “[sales reps] are driven by their own ambition and rewarded with commissions when their efforts generate new sales. They receive their commissions in lieu of overtime and enjoy a largely autonomous work-life outside the office.” Id.
Contrary to the decision in Christopher, on July 6, 2010, the United States Court of Appeals for the Second Circuit found that sales representatives were not exempt from the FLSA overtime-pay requirements. In re Novartis Wage and Hour Litigation, 611 F.3d 141 (2d Cir. 2010). The Second Circuit stated, “[t]o the extent that the pharmaceuticals industry wishes to have the concept of ‘sales’ expanded to include the promotional activities at issue here, it should direct its efforts to Congress, not the courts…we conclude that the district court should have ruled that the Reps are not outside salesmen within the meaning of the FLSA and the regulations.” Id. at 154-155.
This issue could be headed to the United States Supreme Court. How would you decide the case? Is a sales rep actually selling a product or just promoting it? Should a sales rep receive overtime benefits, or does their compensation adequately reward them for the time they spend working? If the Supreme Court determines that sales reps are entitled to overtime pay, what impact might that decision have on the industry’s current selling model and companies' organizational structures? How would sales reps track their time?