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Drug Salesmen Lose Overtime Pay Lawsuit

By Andrew Chow, Esq. on June 21, 2012 9:57 AM

GlaxoSmithKline's drug representatives are "salesmen" who aren't entitled to overtime pay, the U.S. Supreme Court has held in a 5-4 decision.

The Glaxo overtime ruling affects about 90,000 drug company representatives who visit doctor's offices to make pitches for their company's drugs, The Washington Post reports. Pharmaceutical companies can now save billions of dollars a year by not paying overtime to sales reps.

The Court's ruling turned on whether a drug company representative should be considered an "outside salesman" under the federal Fair Labor Standards Act -- a question that divided the Court.

The High Court's liberal Justices argued that workers in the Glaxo overtime lawsuit were not "outside salesmen" because their job was to persuade doctors to prescribe the drugs, not to actually make sales, The Post reports.

But the majority opinion by Justice Samuel Alito found Glaxo's reps "bear all the external indicia of salesmen": They were hired for their sales know-how and worked away from the office with minimal supervision, Alito wrote.

Glaxo's sales reps also collected bonuses based on the strength of drug sales in their regions, The Post reports. Those bonuses "set them apart" from the class of employees entitled to overtime pay, Alito wrote.

The Glaxo overtime lawsuit was the latest in a series of similar suits brought by drug representatives against various pharmaceutical companies. Cases in lower courts led to different results, including a $99 million settlement by Novartis in January, according to Reuters.

For similar pending lawsuits, the Supreme Court's Glaxo overtime lawsuit ruling is now the law of the land. The decision also serves to strengthen the FLSA's outside sales exemption, one corporate labor attorney told Reuters.

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