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Supreme Court Finds Pharmaceutical Representatives Exempt From Overtime

It is one thing to expect regulated parties to conform their conduct to an agency’s interpretation once the agency announces them; it is quite another to require regulated parties to divine the agency’s interpretation in advance or else be held liable when the agency announces its interpretations for the first time in an enforcement proceeding and demands deference.

Accordingly, because of the DOL’s sudden announcement with respect to pharmaceutical sales representatives, the court went on to hold that the degree of deference to the DOL’s interpretation would only be proportional to “the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade.”

The Court was not persuaded by the DOL’s interpretation of the outside salesman exemption. Specifically, the Court rejected the DOL’s interpretation that “a sale demands a transfer of title,” finding that it lacked the “hallmarks of thorough consideration.” In particular, the Court held that the DOL’s position was inconsistent with the statutory definition of “sale” and Congress’ intent to define the term broadly, to account for the context of a given industry. Given the FLSA’s broad definition, the Court reasoned that the pharmaceutical sales representatives’ objective of obtaining nonbinding commitments from physicians to prescribe their employer’s products falls “comfortably” within Congress’ broad definition of “sale.” Moreover, the Court found that pharmaceutical sales representatives “bear all the external indicia of salesmen,” and the nature of their work and relatively high levels of compensation supported application of the outside salesman exemption.

The decision in Christopher is a welcome outcome for the entire pharmaceutical industry. Christopher is also a significant decision on the larger question of how much courts must defer to administrative agency interpretations, especially where the agency has left a particular issue untouched but later announces a contrary interpretation during the course of litigation. Indeed, even the four dissenting justices concluded that an “independent examination” of the outside salesman exemption was necessary given the DOL’s wavering interpretation. In these instances, courts will not simply defer to or adopt an administrative agency’s interpretation of statutory provisions or regulations. As a result, it may be wise for employers to refrain from instantly acquiescing to the positions taken by administrative agencies and, instead, seek legal counsel.