Pharmaceutical sales representatives are exempt from overtime under the Fair Labor Standards act pursuant to the "outside salesmen" exemption.

The Supreme Court found that pharmaceutical sales representatives, whose primary duty is to obtain nonbinding commitments from physicians to prescribe their employer's prescription drugs in appropriate cases, qualify as "outside salesmen" under the Department of Labor's regulations under the FLSA. There, the employees spent an average of 40 hours per week calling on physicians in the field and an additional 10 to 20 hours per week attending events, reviewing product information and responding to phone calls and emails outside of their regular business hours. The employees were not paid overtime for working in excess of 40 hours per week but did receive compensation in the amount of $76,000 and $72,000 a year respectively.

The Department of Labor, which submitted an amicus brief on behalf of the employees, stated that the pharmaceutical representatives were not "outside salesmen" because an "employee does not make a 'sale' for purposes of the 'outside salesman' exemption unless he actually transfers title to the property at issue" and pharmaceutical representatives only obtain commitments from physicians. The Supreme Court, however, rejected the Department of Labor's position, noting that the pharmaceutical industry had little reason until 2009 to suspect that its longstanding practice of treating representatives as exempt outside salesman was incorrect. In particular, the Supreme Court noted that there are more than 90,000 pharmaceutical representatives in the United States, the nature of their work has not materially changed for decades and that, despite this, the Department of Labor never initiated an enforcement action with respect to these representatives and never otherwise suggested that the industry was acting unlawful. Moreover, the Supreme Court determined that the use of the phrase "other disposition" in the Fair Labor Standards Act, along with a list of transactions that preceded that word, indicated "an attempt to accommodate industry-by-industry variation in methods of selling commodities.

Case Law Alert - 3rd Qtr 2012