update.jpgCo-authored by Richard Alfred, Alex Passantino and Jessica Schauer

As reported previously on this Blog, next Monday, April 16, 2012, the U.S. Supreme Court will hear oral arguments in the case of Christopher v. SmithKline, which involves application of the outside sales exemption under the Fair Labor Standards Act (FLSA) to pharmaceutical sales representatives (“PSRs”).  Also before the Court will be the question of whether the Department of Labor’s (“DOL”) position on the exemption, as expressed in a series of amicus briefs, is due deference.  That question may have significant impact on the DOL’s active amicus brief program.

As readers of this Blog may already be aware, the outside sales exemption applies to certain employees “[w]hose primary duty is[] making sales.”  The plaintiff PSRs in SmithKline claim that they do not meet this requirement because federal law prohibits the sale of any prescription drug without the authorization of a licensed physician.  As a result, PSRs cannot consummate a sale of their employers’ products to end-users but instead can only encourage physicians to prescribe those products.  The argument will focus on whether the term “sales” requires a transfer of title or whether it must be interpreted broadly under a functional approach to include anyone who “in some sense” sells. 

The argument will also focus on the degree of deference to be afforded to the amicus brief submitted by the DOL in support of the plaintiffs’ position.  The Court will decide whether the DOL’s interpretation of its own regulations in the brief was entitled to controlling deference (as the Second Circuit held in a similar case 2010 case or whether the Ninth Circuit was correct in holding that no deference is required because the brief represents a departure from “pharmaceutical industry norms[] and the acquiescence of the Secretary [in the exempt classification of similar positions] over the last  seventy-plus years,” and the DOL regulations with respect to the outside sales exemption merely “paraphrase[s] the statutory language,” such that the DOL has no “special authority to interpret its own words.”

SmithKline sits at the intersection of a hot litigation topic, wage and hour law, and a perennial area of dispute at the Court, the limitations on a federal agency’s power to regulate.  As a result, the case has attracted a number of “friends of the court” (“amici”), ranging from trade groups, to PSRs, to constitutional law foundations.  As often is the case in Supreme Court amici briefs, these briefs provide additional insight into the legal arguments, as they address nuances not covered in the principal briefs. 

Most of the briefs in support of Respondent object to the plaintiffs’ view on the deference issue.  For example, the Equal Employment Advisory Counsel argues that the circumstances of the DOL’s unsolicited amicus brief in this case is unlike the amicus briefs at issue in prior Supreme Court cases that have given the DOL’s position deference.  Specifically, in Auer v. Robbins, the Court sought the DOL’s input on a test that was entirely the creation of the agency’s notice-and-comment rulemaking.  The Counsel argues that so-called “Auer deference” should be limited to such circumstances.  The Center for Constitutional Jurisprudence goes even farther, arguing that Auer deference amounts to an abdication of judicial power in violation of separation-of-power principles and is unconstitutional.  The NFIB Small Business Legal Center points out that affording the DOL’s brief deference would have devastating impacts on small businesses, as it would result in retroactive liability and unfair surprise.  Businesses already find it difficult to understand and comply with the overwhelming number of regulations published in the Code of Federal Regulations; subjecting them to regulatory changes set forth in unsolicited briefs filed in specific litigation would virtually ensure an inability to comply.  The Washington Legal Foundation, Allen Educational Foundation, and Cato Institute similarly lament that allowing deference to the DOL in this case would give agencies leave to avoid the formal protections of notice-and-comment rulemaking, which could  significantly undercut predictability.  

The Pharmaceutical Research and Manufacturers of America (“PhRMA”), on the other hand, focuses on the impact that the Court’s decision could have on the pharmaceutical industry.  The group points out that if PSRs are non-exempt, that may require the industry to drastically change that position in ways that may not necessarily be beneficial to the PSRs themselves.  A major benefit of the job as it currently exists is its flexibility, a characteristic that would necessarily change if PSRs were required to track their hours for overtime purposes. 

In support of the plaintiffs, the National Employment Lawyers’ Association and National Employment Law Project argue that the Ninth Circuit’s interpretation of the outside sales exemption would dilute that exemption, introducing uncertainty and “expos[ing] a wide swath of other workers to exclusion from FLSA overtime and minim wage safeguards.”  The brief further argues that, from a historical perspective, employees who do not make actual sales have routinely been held to be non-exempt under the FLSA, and that the exemption should be read narrowly. 

Two groups of PSRs who are or were plaintiffs in other exempt status cases filed briefs in support of the plaintiffs.  A group of PSRs for Johnson & Johnson  argue that all PSR work is “promotion” work, and thus falls outside of the scope of the outside sales exemption.  A group of PSRs for Schering, Pfizer and Sanofi-Aventis argue that the DOL’s position on PSRs has not changed, but rather that the position itself has changed over time due to regulatory changes.  (PhRMA, however, interestingly points out that all of the regulatory changes that these PSRs describe occurred more than half a century ago, yet the DOL did not change its position until recently.)  Finally, a group of medical professionals filed an amicus brief on the plaintiffs’ behalf arguing that, as a result of physicians’ ethical responsibilities, physicians cannot interact with PSRs as though they were buyers in a sales transaction, and “the role of PSRs in influencing prescription decisions [is] de minimis.” 

The influence that the varied views reflected in the briefs of these amici will have on the Supreme Court’s reasoning remains to be seen.  We will be attending the argument on Monday and will update our readers following the argument.