A predictably divided Supreme Court has ruled 5-4 that drug company sales reps are not entitled to overtime compensation under the Fair Labor Standards Act in Christopher v. SmithKline Beecham, No 11-204 (June 18, 2012). The Court's ruling is contrary to a 2010 ruling by the Second Circuit (earlier reported on at Drug Sales Reps Not Exempt from Overtime, Second Circuit Rules) and relieves giant drug company corporations like SmithKline Beecham and others from, as the Court's opinion noted, "potentially massive liability."
The Fair Labor Standards Act exempts from its overtime compensation requirements persons employed as "outside salesmen." The Court majority (the opinion was written by Justice Alito joined by the entirely predictable cohort of Roberts, Kennedy, Thomas and Scalia) ruled that the drug sales reps met the definition of "outside salesmen" even though they did not actually consumate any sales.
The decision can be read in a number of ways and illustrates a number of points. First, one could say the Court majority of Chief Justice Roberts and Justices Kennedy, Thomas, Alito and Scalia again demonstrated their concern for assuring that the Nation's largest corporations avoid and evade "potentially massive liability."
Second, the case can be read as an example of a hostile Court majority blocking and frustrating the policy initiatives of a executive administration to which they are opposed. Justice Alioto's majority opinion pointedly and emphatically criticized the determination of the Obama Administration to enforce fully the Fair Labor Standards Act. One of the initiatives of this heightened emphasis on enforcement was the Department of Labor changed its position regarding whether drug company sales reps met the statutory exemption. Elections may be about something but the Court majority is obviously prepared to block any policy initiatives that, as the Court majority arguably sees it, could impose liability (massive or otherwise) on corporate interests for complying with even long-established laws like the Fair Labor Standards Act.
Third, the majority's opinion strongly suggests that the Fair Labor Standards Act has different application and interpretation depending on how much money the employee is making. The Court, after an introductory paragraph, indicates its bias by asserting that the FLSA was enacted to protect covered workers "from substandard wages and oppressive working hours." This is only partly accurate and would seem to miss the point at that. The protection from "substandard wages" comes from the minimum wage requirements in the FLSA that were in no way at issue in the case. The FLSA does not include any restriction or cap on the number of hours that an employee may be required to work; it simply requires that for those hours worked over 40 the employee must be paid at a higher wage rate. The point of this is to encourage hiring of more workers and creating more jobs. My own experience is that a vast majority of people are happy for the opportunity to increase their earnings by working overtime hours. So the overtime pay requirement of the FLSA is not protection of employees but an attempt to encourage hiring of more employees.
Fourth, like it or not, the Court's decision is defensible. While the drug company reps do not complete a sale in the sense that they get an acceptance from a buyer, they come pretty close and they surely enable sales. Probably it is true that drug company sales reps function like and consider themselves to be salesmen in the traditional sense.
