SmithKline Beecham Wins On "Outside Salesman" Exemption


The Ninth Circuit U.S. Court of Appeals (Alaska, Arizona, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) has added another chapter in the saga of whether pharmaceutical sales representatives (PSRs) qualify for the federal Fair Labor Standards Act's "outside salesman" exemption. The court recently ruled in Christopher v. SmithKline Beecham Corp. d/b/a GlaxoSmithKline that the Glaxo PSRs did fall within the exemption. The decision creates a split in the federal appellate courts by finding that the exemption applied to PSRs performing duties essentially the same as those found to be non-exempt by the Second Circuit in the Novartis case about which we previously reported.

Significantly, the Ninth Circuit also rejected arguments presented in a friend-of-the-court brief filed by the U.S. Labor Department. The court said that the brief was not entitled to controlling deference, contrary to the position taken by the Second Circuit.

PSRs Were Selling

Adopting a common-sense approach to the exemption, the Ninth Circuit said that a "sale" in the pharmaceutical industry's context occurs with "the exchange of non-binding commitments" between a PSR and a physician by which "the manufacturer will provide an effective product [that] the doctor will appropriately prescribe." "[F]or all practical purposes, this is a sale," the court said, noting that the "primary duty" of PSRs "is not promoting Glaxo's products in general or schooling physicians in drug development," but "causing a particular doctor to commit to prescribing more of the particular drugs in the PSR's drug bag," thus increasing company sales....

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