The U.S. Supreme Court nixed a claim by pharmaceutical representatives seeking overtime pay, ruling that such workers are “outside salespeople” and not employees under the Fair Labor Standards Act.

In a 5-4 decision in Christopher v. SmithKline Beecham Corp., the court declined to give deference to the Department of Labor’s interpretation that the representatives’ work did not qualify as “sales” under the act because they merely educate, entertain and pitch their products to doctors rather than sell products directly to them.

“In this case, there are strong reasons for withholding … deference,” Justice Samuel A. Alito Jr. wrote for the majority, noting that the DOL’s interpretation came only after certiorari was granted in the case. “[The sales representatives] invoke the DOL’s interpretation of ambiguous regulations to impose potentially massive liability on [the company] for conduct that occurred well before that interpretation was announced. To defer to the agency’s interpretation in this circumstance would seriously undermine the principle that agencies should provide regulated parties fair warning of the conduct [a regulation] prohibits or requires.”

The case was brought by two former employees of the pharmaceutical company. The men worked as pharmaceutical sales representatives, also known as “PSRs” or “detailers.”

Their job was to contact and pitch certain drugs to doctors in an effort to encourage them to prescribe the medications to their patients. But they were prohibited from directly selling products to doctors.

The company classified the plaintiffs as “outside salesmen,” making them ineligible for overtime compensation under the FLSA.

The men sued, arguing that they were not outside salesmen because their jobs did not involve sales.

The DOL submitted an amicus brief in the case siding with the plaintiffs in their interpretation of the FLSA and its regulations.

But the District Court granted summary judgment for the company, holding that the reps were “outside salesmen” and that the DOL’s interpretation of the law was “inconsistent with the statutory language” and therefore did not warrant deference.

The 9th U.S. Circuit Court of Appeals affirmed, and the Supreme Court granted certiorari.

‘Time on the golf course’

During oral arguments in April, some of the justices expressed doubt about the stance of the detailers and DOL.

Thomas C. Goldstein, a partner in the Washington office of Goldstein & Russell, argued on behalf of the detailers that they are not salesmen and should not fall within the FLSA exemption.

“What happens in pharmaceutical detailing is that there can’t be any commitment to issue a prescription at all,” Goldstein said.

But Justice Ruth Bader Ginsburg wondered if the autonomous nature of the job of detailers made them more like salesmen than employees.

“We’re told that part of this job is to have a good relationship with the doctors. … If you’re right, would the time on the golf course get time and a half?” Ginsburg asked, drawing laughs.

Goldstein said federal regulations restrict the activities that detailers can engage in on the job.

“But whatever it is that the employee is doing to further the employment relationship is going to be hours on duty,” Goldstein said. “[And] while it is true that a pharmaceutical detailer has many of the characteristics of an outside salesman, the one they don’t have is selling.”

When Goldstein said that doctors are not committed to prescribe the drugs, Justice Antonin G. Scalia disagreed.

“There is a commitment,” Scalia said. “What they are trying to get is a commitment to consider this drug if it’s appropriate for prescription to patients in the future. That’s a commitment.”

“If that is the commitment, then all of promotion I think is going to be a sale,” Goldstein replied.

Deputy Solicitor General Malcolm L. Stewart argued as amicus curiae in support of the detailers that “the commitments or the quasi-commitments from physicians in and of themselves are of no value.”

But Scalia grilled him on the approach the government took on the issue.

The government seemed to say, “instead of doing rulemaking, instead of doing adjudication, we’re going to file amicus briefs” in cases like the one at issue, Scalia said. “There are 90,000 of these people, and the agency has not brought any action for these many years. … I just think that’s extraordinary.”

Bright-line rule?

Paul D. Clement, a partner in the Washington office of Bancroft arguing on the pharmaceutical company’s behalf, took the “walks like a duck, quacks like a duck” approach in his argument.

“They were hired for a sales job,” Clement said of the detailers. “They were given sales training. They attend sales conferences. They are assigned to sales territory, and they are evaluated and compensated as sales people.”

“The Department of Labor gives [what] according to them is a bright-line rule,” Justice Sonia M. Sotomayor said. “It’s easy to apply. You have to do some sort of transfer of title” to be a salesperson.

“You can’t defer to the labor department’s preferred construction, because it’s flatly inconsistent with the statute,” Clement argued. “This idea that you have to have a transfer of title cannot be squared” with the statute.

Justice Anthony M. Kennedy asked on what precedent Clement was relying.

“What’s the case that I can cite if this opinion is written the way you propose?” Kennedy asked.

“I would ask you not to be bound by having to cite a case,” Clement said.

“Well, I’d like one,” Kennedy persisted, inciting laughter.

Chief Justice John G. Roberts Jr. focused on practical application.

“Say the doctor hears the [detailer’s] spiel and the doctor says: ‘OK, yours is the first thing I will think of, you know, when I have a patient with this and this.’ I mean, is that a sale?” Roberts asked.

“We think it is,” Clement said.

“[And if] the next guy comes in from the other company and [the doctor] says, ‘OK, when it comes up I’ll think of your product.’ Are those two sales or no sale?”

“I think they are probably two sales, your honor,” Clement said.