Labor: Supreme Court rejects the DOL’s outside sales exemption interpretation

What Christopher v. SmithKline Beecham Corp means for employers

Pharmaceutical companies can breathe a (big) sigh of relief. On June 18, the Supreme Court ruled, in Christopher v. SmithKline Beecham Corp., that pharmaceutical sales representatives (also know as “detailers” and the subject of a previous article) satisfy the Fair Labor Standards Act’s (FLSA) outside sales exemption.

As important as this decision is to the pharmaceutical industry, it also is of great importance to employers generally, for the way the court disposed of the Department of Labor’s (DOL) arguments. The court essentially admonished the DOL for its recent practice of changing its regulatory interpretations via amicus briefs. The court also rejected the DOL’s new, and very technical, interpretation of the definition of a “sale” under the FLSA. Instead, the court took a practical approach to interpreting “sale” and in evaluating whether detailers constitute the type of employees the FLSA was intended to protect.

The DOL also relied on 29 C.F.R. section 541.501 (the sales regulation), which defines “sale” to “include the transfer of title ” The court rejected this argument too, holding instead that the sales regulation states “only that transactions involving a transfer of title are included within the term ‘sale,’” not “that a sale must include a transfer of title.”

After rejecting the DOL’s interpretations, the court went directly to the statutory and regulatory language. First, the court focused on the fact that the outside sales exemption applies to any employee working “in the capacity of [an] outside salesman.” The court took the reference to “capacity” to mean that Congress “favor[ed] a functional, rather than a formal, inquiry, one that views an employee’s responsibilities in the context of the particular industry in which the employee works.”

Contributing Author

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Christine McLaughlin

Christine Liu McLaughlin is a shareholder in Godfrey & Kahn, S.C.'s Labor & Employment Law Practice Group in the Milwaukee office and is chair of the firm's...

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Contributing Author

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Rufino Gaytán

Rufino Gaytán is an associate in Godfrey & Kahn, S.C.'s Labor & Employment Law Practice Group in the Milwaukee office. Rufino assists private and public employers in addressing...

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