Supreme Court Rejects Overtime Pay for Drug Reps

Date : 06/18/2012 @ 10:58AM
Source : Dow Jones News
Stock : Abbott Laboratories (ABT)
Quote : 43.53  -0.45 (-1.02%) @ 4:05PM

Supreme Court Rejects Overtime Pay for Drug Reps

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   By Brent Kendall 
 

WASHINGTON--The Supreme Court ruled Monday that drug companies don't have to pay their sales representatives for working overtime hours, a significant win for the pharmaceutical industry.

The court, in a 5-4 opinion by Justice Samuel Alito, ruled that drug sales reps fall under a provision of federal labor law that removes overtime-pay requirements for those employed as outside salespeople.

The court's ruling rejected arguments by the Department of Labor in favor of overtime pay. The department had argued the outside-sales exemption shouldn't apply because drug reps don't actually sell medicines to doctors but merely promote them.

Justice Alito said the Labor Department's position was "quite unpersuasive." The court's five conservative justices formed the majority that ruled against overtime pay. The court's four liberal justices dissented.

Monday's decision came in a case involving GlaxoSmithKline PLC (GSK, GSK.LN), which was fighting legal claims from two former salesmen who were seeking overtime pay on behalf of a nationwide class of representatives employed by the drug maker.

The case held high stakes for the industry, which spends billions each year promoting drugs to doctors in the U.S.

The Pharmaceutical Research and Manufacturers of America, the drug industry's main trade group, had warned in a court brief that classifying sales representatives as eligible for overtime could expose drug companies to retroactive liability and cost the industry billions of dollars.

Lower courts had issued conflicting rulings on whether the sales representatives were eligible for overtime pay.

Pharmaceutical sales representatives are typically paid a combination of base salary and performance-based commission. In addition, they are usually given a car or an allowance for a car. Many salespeople work long days trying to track down doctors, sometimes waiting until after office hours for a few minutes of face time.

The case is Christopher v. SmithKline Beecham, 11-204.

   Write to Brent Kendall at brent.kendall@dowjones.com 
 



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