Supreme Court: Pharmaceutical Sales Reps Are Exempt

Over the past several years, wage and hour litigation has exploded as employees have increasingly challenged whether their employers have properly classified them as exempt from the minimum wage and 40-hour overtime standards under the Fair Labor Standards Act (FLSA), 29 U.S.C. ” 201 et seq. The risk of improperly classifying employees can be significant because employers who fail to pay overtime properly may be liable for double the amount due for the past two years, plus the employees' attorney fees. If the violation is found to be “willful,” the statute of limitations increases to three years.

Despite the increased litigation, the United States Supreme Court has rarely addressed the FLSA's overtime exemptions. On June 18, 2012, however, the Court finally clarified the criteria for applying the outside sales exemption. In Christopher, the Court, in a 5-4 decision, held that pharmaceutical sales representatives are exempt from overtime laws under the outside sales exemption. The decision immediately affected other litigation involving pharmaceutical sales representatives, and another putative class action, potentially valued at $70 million, was dropped as a result. The decision will likely have an even broader long-term impact, however, because in reaching its decision, the Court refused to give deference to the Department of Labor's interpretation of its own guidelines ' thereby potentially putting a substantial limit on the deference courts give federal agencies' use of amicus briefs to change their interpretations of federal regulations.