Workers lose in Supreme Court overtime case

On Behalf of | Jun 27, 2012 | Employment Law

As the U.S. Supreme Court’s session comes to a close, it feels as if decisions are released at breakneck speed. With so many rulings handed down each day — and with one major opinion held until the last hour — it can be easy to overlook one or two. The court’s opinion in a Fair Labor Standards Act case earlier this month could easily be overlooked. However, the decision will affect an untold number of employees and will change the employment law landscape in every state.

The court was asked to determine if pharmaceutical company marketing representatives’ efforts qualified as sales calls or something else. Under the FLSA, workers employed as outside salesmen are not eligible for overtime pay. In the eyes of the court, these marketing representatives are not eligible for overtime.

Pharmaceutical companies manage their marketing forces a little differently from other industries. The workers in this case are the people who visit hospitals and clinics to persuade physicians to prescribe their company’s products. As the court admitted, these representatives do not actually sell the products; they work to obtain “nonbinding commitments” to prescribe the drugs.

That nonbinding commitment was sufficient for the majority. The representatives are not actually sales people, but they do work that labor laws and federal rules consider to be sales. The activity is not an exchange or a consignment, but that nonbinding commitment is what the law refers to as an “other disposition.” That catch-all term includes activities tantamount to a sale, and the drug rep’s commitment is tantamount to a sale, as well, the court said.

The decision was close — 5-4 — but nevertheless marks a significant victory for the pharmaceutical industry. Had the court gone the other way, the companies could have been liable for billions of dollars in back pay.

While this case only involved one pharmaceutical company, the rest of the industry breathed a billion-dollar sigh of relief when the decision was handed down.

Source: The New York Times, “Justices Back Drug Industry on Overtime,” Adam Liptak, June 18, 2012


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