Iowa Law Blog

Christopher v. SmithKline Beecham

Yesterday the U.S. Supreme Court ruled 5-4 that pharmaceutical sales representatives were "outside salespersons" exempt from the overtime requirements of the FLSA. This is a huge victory for the pharmaceutical companies and a huge defeat to the Department of Labor (and the sales representatives, of course). 

It's not clear whether this opinion will be notable to industries other than pharmaceutical companies because of the unique manner in which pharmaceutical companies do business. The Court's treatment of the DOL's interpretation of its regulations is important. 

 

Prior to 2009, the DOL had not taken an affirmative position on the application of the outside salespersons exemption to pharmaceutical sales representatives. The DOL had not issued guidance or opinion letters regarding its interpretation. It did not provide for notice and comment on its interpretation. The DOL had not used enforcement proceedings against the companies, despite knowing for over 50 years that the companies operated its business in such a manner. Since 2009, the DOL began submitting its interpretation that the representatives did not qualify as outside salesperson through briefs filed in cases throughout the country. While the Court admitted that enforcement decisions are not necessarily related to the agency's view regarding violations, it stated:

 [b]ut where, as here, an agency's announcement of its interpretation is preceded by a very lengthy period of conspicuous inaction, the potential for unfair surprise is acute. . . . [W]hile it may be possible for an entire industry to be in violation of the [FLSA] for a long time without the Labor Department noticing, the more plausible hypothesis is that the Department did not think the industry's practice was unlawful.

It appears that, after reading the dissent, all justices agreed that the DOL's interpretation, announced by brief in 2009 after decades of inaction, should not receive deference. This portion of the decision is important to all employers, as it ensures that the DOL must put employers on notice (at least in some manner) that certain actions or inactions are viewed as a violation.

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