The Supreme Court ruled Monday that drug company representatives paid to persuade doctors to prescribe their products should be considered “salesmen,” a distinction that could save the pharmaceuticals industry billions of dollars in overtime pay.
The court’s five conservatives said the representatives qualified as “outside salesman,” a Labor Department classification that protects their employers from paying overtime.
There are about 90,000 such workers, and drug companies said they could face paying billions of dollars in overtime pay if the Supreme Court had ruled them something other than sales representatives.
The workers “bear all of the external indicia of salesmen,” Justice Samuel A. Alito Jr. wrote for a majority that included Chief Justice John G. Roberts Jr. and Justices Antonin Scalia, Anthony M. Kennedy and Clarence Thomas.
The representatives, Alito wrote, were “hired for their sales experience. They were trained to close each sales call by obtaining the maximum commitment possible from the physician. They worked away from the office, with minimal supervision, and they were rewarded for their efforts with incentive compensation.”
Except, responded the court’s four liberals, they cannot actually make sales. The representatives, called “detailers” in the industry, try to convince doctors to prescribe their drugs, but the next step is for doctors to actually make the prescription, for a patient to decide to fill the prescription and for a pharmacy to sell the drug, wrote Justice Stephen G. Breyer.
“Where in this process does the detailer sell the product?” wrote Breyer, who was joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan.
“At most he obtains from the doctor a ‘nonbinding commitment’ to advise his patient to take the drug (or perhaps a generic equivalent) as well as to write any necessary prescription.”
The suit at the court was filed by Michael Christopher and Frank Buchanan, who worked for a unit of GlaxoSmithKline from 2003 to 2007. They were each assigned to a particular geographic area and responsible for trying to convince doctors to prescribe their company’s drugs when appropriate.
The men, like other sales representatives, worked both during and after normal business hours, often in excess of 40 hours per week. They were paid well, and bonuses were based on the company’s drug sales within their regions.
Under the 1938 Fair Labor Standards Act, the Department of Labor is responsible for deciding what kind of workers are included in the “outside salesmen” categories. Until 2009, the department deemed drug representatives to be included in the classification.
But in a series of lawsuits filed across the country by the workers against their employers, the Obama administration changed its position, and said the drug company workers were not salesmen because they did not actually sell the medications.
Alito said the department was not entitled to the usual deference the court pays agencies, because its longstanding position was reversed through briefs filed in the court cases, not a formal rulemaking process.
Upholding the agency’s position would impose “potentially massive liability” on the drug companies for conduct “that occurred well before that interpretation was announced,” Alito wrote.
Alito said categorizing the drug company representatives as outside salesmen also fit more comfortably with the purpose of the fair labor act.
“The exemption is premised on the belief that exempt employees ‘typically earned salaries well above the minimum wage’ and enjoyed other benefits that ‘se[t] them apart from the nonexempt workers entitled to overtime pay,’ ” Alito wrote, quoting from the labor law.
The case is Christopher v. SmithKline Beecham Corp .