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GSK sales rep overtime pay case reaches US Supreme Court

Appeal from sales reps attempts to overturn lower court ruling in GSK’s favour

The acrimonious dispute about sales representatives' entitlement to overtime pay continued in the US this week, with GlaxoSmithKline defending itself in the Supreme Court.

The Supreme Court is considering an appeal by sales reps Michael Christopher and Frank Buchanan, who are trying to overturn a lower court ruling that they are not entitled to overtime payments because they are classified as "outside representatives" and thus are exempt from federal overtime laws.

At the centre of the case is the interpretation of the US Fair Labor Standards Act (FLSA) which exempts companies from minimum wage and overtime requirements for outside sales representatives and certain other functions such as executive, administrative and professional employees.

However, for other staff it provides a mandatory 'time-and-a-half' payment for time worked over 40 hours a week.

Arguments on both sides were heard yesterday, as lawyers for Christopher and Buchanan argued that the exemption does not apply because pharma reps promote products - and do not actually sell them - when they visit physicians.

In response, GSK's counsel maintained that sales reps are "evaluated and compensated as sales people", in other words they are paid a base salary with performance-based commissions, so the overtime requirements do not apply.

The GSK lawsuit is emerging as a crucial test case for the wider pharmaceutical industry, which is facing overtime claims from an estimated 90,000 US sales reps with potential retroactive liability in the order of hundreds of millions or even billions of dollars.

Novo Nordisk became the latest company to be sued on the issue last month, with similar lawsuits also filed against Johnson & Jonson, Bristol-Myers Squibb, Merck & Co and Novartis, amongst others.

Earlier cases have yielded divergent findings. In July 2010, a court in New York concluded that pharma sales reps cannot by law make a sale to a physician and are only influencing prescribing decisions.

Then, in November the same year, a case brought in San Francisco sided with the pharmaceutical companies, ruling that pharma reps are still salespeople but whose jobs have been adapted to the specific circumstances surrounding the detailing of medicines.

A verdict from the Supreme Court justices on the GSK case is scheduled to be delivered in June.

17th April 2012

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