Supreme Court will hear sales-rep overtime dispute

The U.S. Supreme Court is ready for a showdown on sales-rep overtime. The court agreed to hear an appeal in GlaxoSmithKline's ($GSK) overtime case that was filed by two former reps seeking back pay for themselves and thousands of their fellow salespeople. While the outcome of this individual case will be significant to GSK, it will also determine the fate of other sales-rep overtime claims filed against a who's who in Big Pharma.

Legal disputes over sales-rep overtime pay have been wending their way through the U.S. court system for years. Sometimes reps have prevailed; some drugmakers have won their cases. But recently, appeals have tended to line up along U.S. Circuit Court lines. Cases in the Ninth Circuit--such as GSK's--have ended in victory for the companies. Cases in the Second Circuit have fallen in favor of the reps. The courts have differed in their interpretation of the Fair Labor Standards Act's definition of outside salespeople.

Previously, the Supreme Court declined to hear a case that came up through the Second Circuit, in which a lower court held that reps didn't actually close sales, so they didn't qualify for that overtime exemption under the FLSA. Nor did they qualify for the administrative exemption, the ruling said. In declining to consider that case, the high court affirmed the appeals panel's determination that overtime rules applied to those reps--and perhaps, by extension, to other pharma reps, too.

So, it was almost inevitable that the Ninth Circuit's opposing view would be taken to the Supreme Court. In asking the court to take up their case, the former GSK reps said the overtime question affects "the operations of an entire industry." PhRMA agrees; the industry trade group says classifying reps as eligible for overtime could cost pharma billions of dollars. The justices are likely to hear arguments this spring, with a ruling by the end of June, Dow Jones reports.

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