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US Supreme Court Denies Drug Reps Overtime in Split Decision

In a major win for the pharmaceutical industry, the Supreme Court ruled against sales representatives who had sued GlaxoSmithKline claiming that they should be paid overtime for the hours they spent each week attending work-related social events with doctors. The court ruled 5-4 in favor of the drug manufacturers, saying that pharmaceutical sales representatives are not covered by federal laws that require employers to pay overtime wages.

Clocks-and-drug-repsPharmaceutical representatives spend their time hawking prescription drugs to doctors. Sales jobs typically pay commissions and bonuses but no hourly wages. As a result, salespeople generally do not receive overtime pay regardless of how many hours they work, as detailed in the Fair Labor Standards Act. Pharmaceutical representatives, however, are prohibited by federal law from entering into any agreements with doctors regarding the prescription of specific pharmaceuticals. In fact, in the industry, the representatives are not called salespeople. Instead, they are referred to as detailers.

Two sales representatives had used this unique aspect of pharmaceutical sales to claim that they were not salespeople but employees. The men claimed they worked 10-20 extra hours a week courting doctors outside their normal work weeks and argued that they were owed overtime pay for those hours. The Obama administration agreed with the sales representatives on the grounds that they are not salespeople because they make no sales.

The majority opinion, written by Justice Alito and backed by Justices Kennedy, Thomas, Roberts and Scalia ruled that pharmaceutical representatives are not hired to simply educate physicians about drugs. Rather, they are hired to sell them on their companies’ products. The minority opinion, written by Justice Breyer and backed by Justices Ginsberg, Sotomayor and Kagan, stated that pharmaceutical representatives cannot be characterized as salespeople but are actually promoters, whose job is merely to stimulate sales. As such, they are eligible for overtime pay.