Pharmaceutical sales representatives meet the definition of “outside salesmen” under the Fair Labor Standards Act, which means they can be classified as exempt employees and can be paid salary and bonus as opposed to being paid hourly with overtime. Also held that a Department of Labor amicus brief that changes policy, create unfair surprise and would impose substantial retroactive liability is not entitled any deference beyond simply its power to persuade.
Significance of Holding:
• This the first SCOTUS since the enactment of the Fair Labor Standards Act in 1938 to interpret a major exemption to the Act.
• This decision not only ends this case but shuts down the entire FLSA classification litigation against the pharma industry, thereby saving the industy billions of dollars in potential liability
• This decision protects the right of tens of thousands of pharma reps to be paid the way they always have been, to have the freedom to schedule their day as they like, and to not have to keep time sheets
• This decision suggests that the outside sales exemption is meant to accommodate “industry by industry variations in methods of selling commoditities,” which may open the door for broader application of this exemption in other industries
• Its emphasis on “capacity” language could be applied to widen other exemptions that use similar “capacity” language.
• The standard it uses to determine what deference to give a DOL amicus brief will likely severely curtail the DOL’s use of such briefs.
Interesting facts:
• Although GSK won in the District Court and the 9th Circuit, it acquiesced in plaintiff’s petition for cert. GSK took this very unusual path because it felt that a contrary decision in the 2nd Circuit in a case against Novartis meant that the only true path to victory for the industry was through the Supreme Court.
• In this case, the conservative wing of the SCOTUS affirmed the 9th Circuit in an employment case. This is highly unusual.
• This FLSA collective action case made it all the way to the SCOTUS without a class ever being certified because GSK had successfully cross-moved for SJ at the same time plaintiffs moved for class certification.
Key Defense Team Members:
• Overall case lead – Mark E. (Rick) Richardson, VP and Associate GC, GSK
• Overall outside lead – Barbara L. Johnson, Paul Hastings (Wash, DC) with substantial help from Kerry A. Shad, Smith Anderson (Raleigh, NC)
• District Court trial counsel – Jay Zweig, Bryan Cave (Phoenix, AZ)
• 9th Circuit Oral Argument – Neal Mollen, Paul Hastings (Wash DC)
• SCOTUS brief – Paul Clement, Steve Potenza and Jeffrey Harris of Bancroft LLC (Wash, DC), Neal Mollen and Rick Richardson
https://www.iadclaw.org/assets/news/11-204_(GSK).pdf