Supreme Court says drug companies don't have to pay sales reps overtime

Pharmaceutical companies don’t have to pay overtime to their salespeople, the Supreme Court said in a 5-4 decision Monday.

Federal law requires most employers to pay overtime to employees who work more than 40 hours per week, but the requirement does not apply to anyone who is employed as an “outside salesman.”

The court said drug companies’ salespeople fall under that exemption and therefore aren’t entitled to overtime pay.

The ruling is a loss for the Obama administration, which had argued that drug representatives do not fall under the definition of salespeople.

Pharmaceutical representatives’ job is to persuade doctors to prescribe their company’s drugs. Doctors don’t purchase the drugs themselves — they write prescriptions and consumers make the actual purchase.

The Supreme Court’s majority rejected that interpretation, in part because the Labor Department only adopted it in this case. The department had not tried to write its definition of “sales” into regulations, so the public never had a chance to weigh in, and it had never taken action against drug companies for not paying overtime.

“The DOL’s current interpretation — that a sale demands a transfer of title — is quite unpersuasive,” Justice Samuel Alito said in the majority opinion. “It plainly lacks the hallmarks of thorough consideration.”

Also in the majority were Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas and Anthony Kennedy — the four conservative members and Kennedy, the court’s traditional swing vote.

Justices Stephen Breyer, Sonia Sotomayor, Elena Kagan and Ruth Bader Ginsburg dissented.

Pharmaceutical representatives — known in industry jargon as “detailers” — do not directly sell a product and therefore are not salespeople, Breyer wrote in the dissenting opinion.

“What the detailer does is inform the doctor about the nature of the manufacturer’s drugs and explain their uses, their virtues, their drawbacks, and their limitations,” Breyer wrote. “The detailer may well try to convince the doctor to prescribe the manufacturer’s drugs for patients … Where in this process does” the detailer sell the product?”

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