There’s some pretty prolific fallout out there around the Supreme Court’s decision Monday to strike down two SmithKline Beecham Corp. pharmaceutical sales representatives’ claim that they should have gotten overtime because they worked more than 40 hours a week.
Just as impressive as the decision is for those directly involved is the fact that it also strikes down an Obama Adminsitration interpretation of labor law.
Here’s part of the Wall Street Journal ‘s recap (subscription required) that sums it up pretty succinctly.
In the Christopher v. SmithKline Beecham Corrp. decision, a 5-4 majority clarified that white-collar sales reps for drug companies don’t qualify for overtime. Two employees for SmithKline Beecham made such a claim, and the Obama Labor Department jumped in with an amicus brief in this and similar cases. A favorable ruling would have freed the plaintiffs bar to bring class actions on behalf of 90,000 drug reps for billions in back pay.
The High Court ruled that the claim wasn’t required under the 1938 Fair Labor Standards Act, which was enacted to protect workers from “substandard wages and oppressive working hours” and explicitly exempted “outside salesmen.” The plaintiffs argued they aren’t in sales because they merely “promote” drugs to physicians. But the Court noted that federal laws bar drug companies from selling certain products directly to consumers; they must be prescribed by physicians.
The WSJ also pulled no punches in commending the majority “Supremes” for holding tough in their ruling. “The Supreme Court doesn’t get overtime pay, but maybe it ought to for striking down a novel Obama Administration interpretation of labor law on Monday,” the piece “An Overtime Victory,” starts out. It goes on to say that the majority was “not not amused by the Labor Department’s attempt at regulation-by-amicus brief.” It continues:
Justice Alito wrote that Labor had not once—in 70 years of the drug-rep pay system—filed an enforcement action of this kind. Instead of going through a formal rule-making, the agency joined lawyers to force what Justice Alito called an “unfair surprise” on the industry.
The lawsuit was part of the Administration’s campaign to bring more workers under wage-and-hour laws, the better to unionize and provide trial-bar jackpots. Courts have mostly taken a dim view of these legal runarounds, and the Supremes deserve credit for upholding long-settled labor law.
The arguments on both sides focused on whether sales were actually made or not. The Department of Labor, Obama administration and dissenting judges held to the notion that the Fair Labor Standards Act’s “outside sales exemption” did not apply to the representatives because no actual sales transaction took place.
It’s complicated, and the fallout — legally and through discourse — is only beginning. In this post on the Wage & Hour Litigation Blog, attorneys Richard Alfred, Alex Passantino and Jessica Schauer write about its impact:
Obviously, the impact of the Court’s decision will be felt most immediately in the pharmaceutical industry. Dozens of pending cases around the country will likely be dismissed based on this decision. Dozens more nascent lawsuits likely will never be filed, and the tens of thousands of employees who are currently working as [pharmaceutical sales representatives] will continue to be treated as exempt, at least under federal law and in states that follow the FLSA’s outside sales exemption.
But the Court’s decision in the Christopher case potentially permits employers in all industries to classify a wider variety of employees as outside sales, even if the employee does not directly effect a transfer of title. Moreover, due to the Court’s decision on deference [striking down the Obama brief’s argument that the DOL’s interpretation of its regulation should be given Auer deference], the Christopher case is likely to reverberate throughout many other industries.