The United States Supreme Court held today that pharmaceutical sales representatives are exempt from overtime under the outside sales exemption of the Fair Labor Standards Act. The significance of the decision for labor lawyers and employers is not necessarily in the result, but in the Court’s sharp criticism of the DOL’s interpretation of its regulations in advancing its position.
A copy of the opinion is attached here, Christopher et al v. Smithkline Beecham, 567 U.S. ___ (2012), Slip Opinion No. 11-204.
The DOL took the position in amicus briefs that pharmaceutical sales representatives were not shielded from overtime by the outside sales exemption, because they were not technically making sales. Rather, pharmaceutical sales representatives, or “detailers,” were promoting drugs to physicians and obtaining a “non-binding commitment” to prescribe a drug. The DOL argued that this was promotion, not sales.
In a 5-4 decision, the United States Supreme Court disagreed, holding that a transfer of title need not occur in order for the transaction to constitute a sale.
In order to reach the decision, the Court had to rule that the DOL’s interpretations were not entitled to the deference normally afforded to an agency interpretation. Instead, the Court held that the DOL’s position was plainly erroneous, inconsistent with the regulations and not reflective of a “fair and considered judgment on the matter.”
Of even more assistance to labor lawyers and employers is the language used by the Court in cautioning against the “unfair surprise” of imposing liability based on an the application of an interpretation made by an agency after the conduct occurred:
There are strong reasons for withholding Auer deference in this case. Petitioners invoke the DOL’s interpretation to impose potentially massive liability on respondent for conduct that occurred well before the interpretation was announced. To defer to the DOL’s interpretation would result in precisely the kind of “unfair surprise” against which the Court has long warned.
Syllabus at p. 3 (citations omitted).
We have recently asserted a similar argument on behalf of a client in an FLSA action involving a late DOL interpretation of the Motor Carrier Act exemption. This case may prove helpful in reigning in broad interpretations asserted by the DOL in wage and hour matters.
Ultimately, this decision hinges upon the principles of statutory construction and interpretation.