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In this article,
Jon McNutt, an associate in
JMBM's Labor & Employment Group, reviews the United
States Supreme Court's recent decision concerning overtime
exemption under the Fair Labor Standards Act.
The Fair Labor Standards Act's (the "Act")
outside salesperson exemption has been a hotly contested issue for
many years. To qualify for this overtime exemption under the Act,
an employee's primary duty must be "making sales"
and the employee must be "customarily and regularly"
engaged in making sales outside the employer's place of
business. Employers and plaintiffs have clashed over the types of
duties that meet the criteria - including whether individuals who
lay the groundwork for a product's sale are, in fact,
salespersons.
On June 18, 2012, the United States Supreme Court in
Christopher v. GlaxoSmithKline Beecham provided guidance
on this issue and handed employers a victory. In
Christopher, two former GlaxoSmithKline pharmaceutical
sales representatives filed a class-action lawsuit claiming that
they were not paid for hours they worked each week outside the
normal business day. Their jobs required them to meet with doctors
in their offices to pitch Glaxo products, but also to attend
conventions, dinners, and golf outings. GlaxoSmithKline argued that
their job duties and work away from the employer's business
exempted them from overtime pay, whereas the employees claimed that
since they were not actively involved in the product sale, they
should receive overtime pay.
In a split 5-4 decision, the High Court held that the former
employees qualify as outside salespersons and were therefore exempt
from overtime. Justice Alito, writing for the majority, said that
the "'drug sales representatives' "end goal
was not merely to make physicians aware of the medically
appropriate uses of a particular drug. Rather, it was to convince
physicians actually to prescribe the drug in appropriate
cases" – thus making them sales representatives.
"For these reasons, we conclude that petitioners qualify as
outside salesmen under the most reasonable interpretation of the
DOL's regulations."
This decision has broad implications for employers with outside
sales employees. Certain employers may now have more leeway with
employees who establish relationships with customers, even though
no actual sale occurs at the time.
California employers should be aware, however, that applicable
Wage Orders apply a different standard and may be more restrictive.
Employers should review their employees' job duties and
consult counsel to determine whether they may qualify for the
exemption under state and federal laws.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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