Outside sales persons are generally exempt from the overtime laws. The question becomes what is a true “outside salesperson”. For one class of workers, pharmaceutical sales reps, the U.S. Supreme Court has provided the answer. At least as far as the Fair Labor Standards Act (FLSA), outside sales reps in the pharmaceutical industry are exempt from overtime. Interesting to me is that the Court based its holding on the most “reasonable” interpretation of the Department of Labor’s regulations. In doing so, it disregarded what the Department of Labor itself said was its actual interpretation. The implication is that “changing interpretations” that shift with the political winds are not entitled to deference by the Supreme Court. The DOL argued that because a pharmaceutical rep cannot by law make a direct sale to a physician, he or she is not a true “salesperson”. The Supreme Court took more practical approach saying that the “sale” was a process that was considerably more broad and flexible than an actual signed purchase agreement.

There may be a host of outside representatives who are part of the “sales process” but who do not close the sale with a signed document. This U.S. Supreme Court decision may limit the opportunity of persons not involved in the actual sale of the object or service to obtain overtime pay. For example, what about the highly technical person who provide sales support for the salesperson in the field during a PowerPoint presentation to a customer? Or, what about the salesperson himself or herself who is part of the sales team, but not the specific person who “closes the deal?” In the pharmaceutical industry, the sales rep usually obtains a “nonbinding commitment” from the medical provider. The Supreme Court considered this kind of commitment close enough to a “sale” to bring the employee within the “outside sales” exemption.

The Supreme Court decision will provide guidance in the interpretation by California courts of California overtime law. However, California is permitted to establish more liberal overtime pay regulations. Therefore, the decision is not precedent binding on California courts concerning California wage law.

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