The U.S. Supreme Court has agreed to hear a case involving overtime pay for pharmaceutical company sales representatives. At issue is whether the federal Fair Labor Standards Act (FLSA) guarantees overtime pay to drug sales reps.
It has been standard practice for drug makers to avoid paying overtime to pharmaceutical sales representatives by classifying them as commissioned outside sales people, or administrative personnel, both categories that are exempt from the FLSA. They are typically paid a base salary plus commission, and may also be given use of a car or paid a car allowance.
According to a report from the International Business Times, drug reps have filed dozens of lawsuits in recent years seeking overtime pay from pharmaceutical companies. Approximately 90,000 people in the U.S. are employed as drug reps, and a Supreme Court ruling in their favor could cost pharmaceutical companies billions.
On Monday, the High Court agreed to hear a proposed class action lawsuit brought by two ex-GlaxoSmithKline sales representatives seeking to benefit all drug sales reps employed by the company. The lawsuit claims the reps are due overtime pay for the 10 to 20 hours they worked each week on average outside the normal business day. According to a report from The Wall Street Journal, the Ninth U.S. Circuit Court of Appeals ruled in February that the Glaxo representatives weren’t entitled to the extra pay.
But that ruling conflicted with another decided by the Second Circuit in New York, which revived employee overtime claims against U.S. units of Merck & Co. and Novartis AG. In doing so, the Second Circuit noted that drug sales reps can’t take orders or obtain binding commitments from doctors, the Journal said.
The U.S. Department of Labor is supporting the drug reps in their quest for overtime pay, the International Business Time said, arguing that because they never actually sell anything to physicians, drug reps are outside the FLSA’s overtime pay exemption. The Labor Department maintains the FLSA exemption only applies when a salesperson is directly involved in a “consummated transaction.”
The Supreme Court did not comment on its decision to take up the Glaxo lawsuit. According to The Wall Street Journal, the High Court will likely hear arguments this spring and rule in the fall.