Pharma Sales Reps are Exempt:

U.S. Supreme Court 5-4

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Majority rejects DOL reg

claiming “sale” must involve

transfer of title

 

            Deferring to decades of industry practice, and declaring that the context of the industry has a bearing on how the Fair Labor Standards Act is interpreted, the U.S. Supreme Court this morning ruled in Christopher v. SmithKline that pharmaceutical sales representatives fall within the outside sales exemption under the Act.  The Department of Labor failed in its attempt to persuade the Court that a sale requires a transfer of title.  But ambiguously, Justice Alito held that a PSR’s work was “tantamount to a sale.”

 

            PSRs generally have territories in which they visit physicians and pharmacists to recommend that certain products be prescribed by patients.  They do not take orders; the Court found that no PSR can consummate an actual sale of a prescription drug to an end user.  But it implied that PSRs indirectly make these sales happen.  This is a less than clean decision since the Court on the one hand is saying that the Act’s exemptions must take into account the realities of the industry, but then glosses over the inherent lack of a commitment to buy that is generated by a PSR’s visit to a doctor.

 

            The Court’s rejection of the DOL interpretation of the Act is significant.  Historically the Court (and the lower federal courts) tend to defer to the agency’s regulations and other interpretations.

 

            In his dissent Justice Breyer reasoned that the non-binding nature of commitments that doctors give drug reps were “definitely maybe” understandings analogous to what promoters show for their activities, not true sales efforts.

6/19/12