Rainey Kizer’s Latosha Dexter Says Supreme Court’s Decision On Categorization Of Pharmaceutical Sales Reps May Impact Other Industries

MEMPHIS, Tenn. (July 22, 2012) – A U.S. Supreme Court decision that pharmaceutical sales representatives are to be considered outside sales representatives under the Fair Labor Standards Act may have an impact on other industries, according to Latosha Dexter, an employment law attorney at Rainey, Kizer, Reviere & Bell PLC (Rainey Kizer). Dexter’s analysis of Christopher v. SmithKline Beecham Corp., 2012 WL 2196779 (June 18, 2012), was published in the July, 2012 edition of HR Professionals Magazine (http://bit.ly/OfUNLe).

“This decision comes at a time during which the Department of Labor (DOL) has increased enforcement of the law to prevent employers from misclassifying employees as exempt from the minimum wage and overtime provisions of the FLSA,” Dexter said. “Whether an employee falls within the exemption depends on the specific facts and circumstances including the salary paid, sales or market incentives, and job responsibilities,” she explained.

In this case, the plaintiffs, two pharmaceutical sales representatives for SmithKline Beecham (SKB), based their claim on a Department of Labor regulation defining a sale as a “consummated transaction.” Rather than a commission on “consummated transactions,” the representatives received incentive payments based on the market share of their assigned products in their sales territory in addition to a base salary. They argued that because only doctors can write prescriptions and they could only secure a commitment to prescribe, there was not a consummated transaction.

The Supreme Court interpreted the FLSA and its regulations broadly. Noting that the pharmaceutical industry has long relied on the exemption without any enforcement efforts prosecuted by the DOL, the Court stated that giving deference to the DOL’s newly stated position requiring a consummated sale would constitute unfair surprise and impose potentially massive liability on the industry. The Court also noted that the plaintiffs were well compensated and that they did not fall into the category of employees the FLSA was designed to protect.

“Employers should not automatically assume that all persons titled “pharmaceutical sales representatives” or “sales representatives” fall within the outside sales exemption,” Dexter noted. “The plaintiffs in the Christopher case were paid well and worked with minimum supervision and much discretion. Employers should remain vigilant as the DOL is not likely to decrease its enforcement actions. Improper classification exposes an employer to significant monetary penalties including payment of back overtime and fines.”

About Rainey Kizer

Rainey, Kizer, Reviere & Bell PLC. is AV rated by Martindale-Hubbell and was named a Go-To Firm® by Fortune 500 general counsels. The full-service law firm with offices in Jackson and Memphis represents local, state, and national clients before state and federal courts and regulatory agencies throughout the Mid-South. For more information visit  https://raineykizer.com.