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Supreme Court Hammers DOL in Christopher v. SmithKline Beecham Corp.

June 22, 2012 — Washington, D.C. — At issue in Christopher v. SmithKline Beecham Corp. is if deference is owed to the Secretary of Labor's interpretation of the Fair Labor Standards Act's outside sales exemption and related regulations and whether FLSA’s outside sales exemption applies to pharmaceutical sales representatives (PSRs).  The case originated with two former employees, Shane Christopher and Frank Buchanan, of SmithKline Beecham Corp. (doing business as GlaxoSmithKline) filing suit after their employment arguing that they had been improperly classified as exempt under FLSA and therefore deprived of overtime wages.

On both the issues of deference and classification of PSRs, the Court affirmed the judgment of the 9th Circuit Court of Appeals.  The Court found that PSRs should be classified as outside salespeople and are therefore exempt from FLSA-required overtime pay. The Court voted 5-4, with Justices Alito (author of the majority opinion), Roberts, Scalia, Thomas and Kennedy voting to affirm with Justices Breyer (author of the dissenting opinion), Ginsburg, Sotomayor and Kagan dissenting.  The Court’s ruling will also provide companies more leeway to classify employees as exempt outside sales people given the broad legal definition of sales adopted by the majority opinion.

While neither component of the decision was totally unexpected, the way in which the majority opinion took the Department of Labor (DOL) to task may have been. The majority opinion went after the DOL on the issue of deference as well as on the regulations themselves.

The majority opinion first hits DOL on the inconsistency with which it has defended the regulation in question. Justice Alito writes in the majority opinion that “While the DOL’s ultimate conclusion that detailers are not exempt remained unchanged since 2009, the same cannot be said of its reasoning,” calling attention to the changes DOL has made to its interpretation while painting it as the agential version of a political “flip-flopper.”  Changes or not, the majority opinion shot down the interpretation of “sale” entirely, stating very emphatically that “DOL reads the sales regulation to mean a sale necessarily includes the transfer of title, but that is not what the regulation says.  And it seems clear that that is not what the regulation means.”  Without even getting into the issue of deference, the majority opinion makes it clear that the majority doesn’t find the argument at all persuasive.  Despite this, the key deference issue was not forgotten. The majority opinion reads that “we…accord the departments interpretation a measure of deference proportional to the thoroughness evident in its considering and validity of its reasoning” and quickly follows that statement up with the biting retort that the DOL’s action “plainly lacks the hallmarks of thorough consideration.”

The particularly stern rebuke by the Supreme Court of the Department of Labor is certainly significant. The Court’s decision can be read as a strong warning to all regulatory agencies against abusing their privileges to in absence of congressional action under Auer v. Robbins.  In fact, the case against DOL’s call for deference was so defenestrated by the Court that not even the minority opinion, which is in favor of providing FLSA-mandated overtime pay to PSRs, gave it any support.  With its strong response, the Court has sent a noteworthy message against governance through ambiguous, inconsistent, and poorly thought out regulatory interpretations.

 

The opinions expressed are solely those of the author and do not necessarily represent those of WorldatWork.

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