Supreme Court Ruling Could Help Employers Exempt More Sales Employees from Overtime Requirements

Author: Michael Cardman, XpertHR Legal Editor

Pharmaceutical sales representatives can qualify as outside salespersons exempt from federal overtime laws, even though they do not make "sales" in the traditional sense of the word, the U.S. Supreme Court ruled on June 18, 2012.

The U.S. Department of Labor had argued that outside salespersons must transfer the title to a property. But the Supreme Court rejected that argument, ruling instead that "arrangements that are tantamount, in a particular industry, to a paradigmatic sale of a commodity" also qualify as sales.

As a result, when pharmaceutical sales representatives obtain nonbinding commitments from physicians to prescribe their employers' drugs, they are making a sale and thus eligible for the outside salesperson exemption under the Fair Labor Standards Act. Christopher v. SmithKline Beecham Corp., +2012 U.S. Lexis 4657 (U.S. 2012).

A broad variety of other transactions could also fall under this definition, making it easier for employers in other industries to classify their sales employees as exempt.

Additional Resources

Employee Compensation > Employee Classification > Outside Salespersons

How to Determine if an Employee Qualifies for the Outside Sales Exemption

Outside Salespersons Need Not Transfer a Title or Consummate a Transaction to Be Exempt from Overtime