Outside sales representatives are generally classified as ‘exempt’ under the Fair Labor Standards Act (FLSA) and they do not have to be paid overtime for hours spent working beyond 40 hours per week. The United States Supreme Court is currently considering whether drug sales representatives should actually be considered ‘non-exempt’ under the FLSA and must be paid an overtime premium.
Two former Glaxo-Smith-Kline (GSK) drug representatives claim that they were misclassified as exempt and not paid overtime for an average of 10 to 20 hours per week. They seek back overtime pay for those hours and want to puruse an overtime for misclassified employees case as a class action on behalf of other GSK pharamceutical reps.
The Court of Appeals for the Ninth Circuit held that the drug reps were properly classified as outside sales representatives and were not eligible for overtime pay. But the Second Circuit came to the opposite holding in another case, paving the way for the trip to the Supreme Court.
The issue with drug representatives is that they typically do not sell any drugs, they merely talk up their employer’s offerings with the idea that a doctor will promote the drug(s) when he or she feels they’d be a good medical fit for a patient.
In 2009, the Department of Labor (DOL) said that the existence of an actual sales transaction is the cornerstone for determining whether an employee is an outside sales representative or not. In the case of drug sales representatives, no sale ever takes place between the rep and his or her audience, so the position is not properly classified as an exempt outside sales position, according to the DOL.
GSK argued that requiring overtime pay for drug sales reps, who receive a base salary plus commission, would amount to over a billion dollars in added expenses to the pharmaceutical industry. The Supreme Court is expect to decide the issue in June.
Source: The Wall Street Journal, “Supreme Court Weighs Overtime Pay For Drug Reps,” Brent Kendall, April 16, 2012