Lawyers representing a pharmaceutical manufacturer and sales representatives who encourage doctors to prescribe the use of the company’s products squared off on April 16 before the U.S. Supreme Court, but they and a deputy solicitor general faced active and sometimes skeptical questioning about the Fair Labor Standards Act’s outside sales exemption and an appropriate interpretation of the act (Christopher v. SmithKlineBeecham Corp. d/b/a GlaxoSmithKline, U.S., No. 11-204, oral argument
Justice Ruth Bader Ginsburg acknowledged that Michael Christopher and other “detailers” or pharmaceutical sales representatives claim they regularly work more than 40 hours per workweek without receiving overtime compensation, and their work includes dining or golfing with physicians in an effort to encourage them to write prescriptions for GSK medications. But she asked the employee’s lawyer, Thomas C. Goldstein of Goldstein & Russell in Washington, D.C., “If you’re right, would the time on the golf course get time and a half?”
Chief Justice John G. Roberts questioned Paul D. Clement of Bancroft PLLC in Washington, D.C., who argued for the company, about GSK’s argument that an employee engages in sales work by securing a commitment that the doctor will consider use of a medication when an appropriate patient need arises. Roberts asked if the same physician gave the same response to a competing representative, “Are those two sales or no sales?”
Deputy Solicitor General Malcolm L. Stewart, who represented the federal government as an amicus curiae supporting the employees, was pressed on the Labor Department’s actions on the outside sales exemption. Several justices questioned the government’s filing amicus briefs on the status of pharmaceutical sales representatives, rather than engaging in rulemaking to clarify the rights of employees engaged in an industry sales process that Justice Antonin Scalia called “peculiar.”
The argument arose on review of a February 2011 decision by the U.S. Court of Appeals for the Ninth Circuit, which held that the FLSA’s outside sales exemption barred the overtime claims of a proposed class of drug sales representatives for GlaxoSmithKline (635 F.3d 383, 17 WH Cases 2d 353 (9th Cir. 2011).
The Ninth Circuit declined to defer to DOL’s position that the exemption did not cover the drug sales representatives because their job was to promote their company’s drugs, not to make final sales. The agency’s view was expressed in an amicus brief in the
In July 2010, the Second Circuit had reached the opposite conclusion, holding that drug sales representatives for Novartis Pharmaceuticals Corp. and Schering Corp. were not FLSA-exempt and could pursue overtime claims under the federal wage and hour law (611 F.3d 141, 16 WH Cases 2d 481 (2d Cir. 2010)).
The Supreme Court denied Novartis’s and Schering’s petitions to review the Second Circuit decision, but the high court granted Christopher’s petition to review the Ninth Circuit ruling.
SmithKline Beecham, doing business as GlaxoSmithKline, and now known as GlaxoSmithKline LLC, argued that the Ninth
Circuit ruling was correct. However, the company acquiesced in the petition for Supreme Court review, acknowledging that “the issues are important, the circuits are badly divided, and [SmithKline] and the pharmaceutical industry more broadly need a clear and uniform answer to the questions presented.”
FLSA’s Section 13(a)(1) exempts from the law’s overtime requirements any employee who works “in the capacity of outside salesman (as such terms are defined and delimited from time to time by regulations of the [labor] secretary).”
Section 3(k) of the act provides that “sale” or “sell” under the statute “includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.”
DOL has issued regulations on the outside sales exemption, stating that “sales” within the meaning of the FLSA include “the transfer of title to tangible property, and in certain cases, of intangible … property.” The regulations also repeat the text of Section 3(k) of the act. In another FLSA regulation discussing “promotion work,” the Labor Department stated that “promotional work that is incidental to sales made, or to be made, by someone else is not exempt outside sales work.”
In its amicus briefs submitted both to the Second and Ninth circuits, the Labor Department said the FLSA and its own regulations support a holding that drug firm sales representatives, who promote their firm’s products and encourage physicians to prescribe them, are not covered by the outside sales exemption because they never in any sense make a sale.
The Second Circuit decided in Novartis that it should defer to DOL’s “reasonable” interpretation of its own regulations, but the Ninth Circuit in SmithKline rejected deference, characterizing the labor secretary’s amicus brief as a “reinterpretation” of the FLSA and as “plainly erroneous and inconsistent” with the FLSA regulations.
The Ninth Circuit then interpreted the FLSA exemption on its own and concluded that drug firm sales reps are “outside salesmen” because their in-person promotional efforts are intended to culminate in sales of the prescription drugs they present to physicians.
Goldstein explained to the court that while pharmaceutical representatives spend considerable effort convincing doctors about the merits of products, “the pharmaceutical company sells its products … to pharmaceutical wholesalers, which sell them to pharmacies … which sell them to customers, which have a relationship with a doctor, who may or may not have met with a detailer.”
“There is a sale here in this industry,” but it is to a wholesaler, not to the physician who met with a “detailer” or sales representative, Goldstein argued.
Scalia, drawing laughter with a remark that his law clerks “supplement my sparse life experience,” said one clerk had described salesmen selling frames who secure commitments to buy frames in the future, rather than immediate orders. “Now, is that a sale?”
Goldstein said the hypothetical did describe a sale but distinguished that scenario from the current case. Because it is unlawful for pharmaceutical reps to sell drugs directly to physicians, drug reps get no more than a response that doctors will consider drugs for
patient use in the future if and when the medication would be appropriate for a particular patient. A physician cannot make a commitment to write a prescription in the future, Goldstein said, because it would be “illegal as a matter of law.”
But Scalia said “there is a commitment.” Industry representatives, the justice suggested, are “trying to get … a commitment to consider this drug if it’s appropriate for patients in the future. That’s a commitment.”
Stewart, arguing the government’s position in support of the employees, said DOL regulations have provided since 1949 that a sale within the meaning of Section 203(k), defining “sale” or “sell,” includes a transfer of title. Justice Sonia Sotomayor said the
government’s brief to the Supreme Court appeared to suggest a “rigid test,” but she pointed out that Section 203(k) also includes a “consignment for sale” within the definition of a sale. “So what is the government’s position?” the justice asked.
The deputy solicitor general said “it would have been more precise to say that there has to be a transfer of possession in contemplation of a transfer of title.”
Answering questions about DOL’s regulations posed by Justice Elena Kagan, Stewart said that “if the relevant sales are, as we believe, GSK’s sales to—the transfer of drugs to—wholesalers and pharmacies in return for consideration, the detailers don’t play an essential role in the consummation of those sales. They don’t participate in those sales.”
Kagan responded, “But that seems a little bit blind to the way the industry actually works. The way this industry actually works is the real work is done by the detailer getting the doctor to say, ‘yeah, I’m going to start prescribing this where it’s medically appropriate.’ The actual sales from the company to the pharmacy just follows from however successful the detailer is.”
Justice Stephen G. Breyer noted that a DOL guidance on the outside sales issue dated to 1940, when an agency publication that became known as the Stein report described employees’ work as sales whenever they “in some sense make a sale.” But Breyer observed that the parties have estimated there are presently tens of thousands of people employed in the United States as detailers or pharmacy sales representatives, “and there’s a history of 75 years of nobody said anything.”
Breyer said that if the agency was going to reverse its position on the exempt status of such a number of employees, “the right way to do it is to have notice and comment, hearings, allow people to present their point of view, and then make some rules or
determine what should happen.”
Justice Anthony M. Kennedy expressed his own concern about the lack of rulemaking on the issue. “[I]nstead of doing
a regulation, amended regulation, as Justice Breyer indicates, you’re filing amicus briefs quietly in different courts. It seems to me that’s not nearly as fair or straightforward or as candid as an agency ought to be,” Kennedy said.
Scalia called it “extraordinary” that DOL would “come in and say: ‘Oh, you have been in violation of the law in the past, and you’re going to have to pay a lot of money for all these people who you didn’t give overtime to in the past.’ ”
Clement began his argument on behalf of the company by asserting that the two sales representatives who initiated the lawsuit were hired and trained for a sales job, attended sales conferences, had sales territories, and have been evaluated and compensated as sales people.
But Roberts said, “Your long list sort of stopped one step short. They don’t make sales.”
Clement argued the representatives make sales “in some sense,” which he said “is the practical construction the agency has always put on the sales requirement.”
Sotomayor questioned whether accepting that argument would mean “every promotional person will be a salesman,” but Clement argued that in order for an employee to be FLSA-exempt, the worker would have to have exempt sales work as a primary duty/
Ginsburg asked whether GSK had also argued that the pharmacy sales representatives were overtime-exempt under the FLSA as administrative employees. Clement said the company did so, but the administrative exemption is not before the Supreme Court because the trial court granted the employer summary judgment on the sales exemption and did not have to rule on the administrative employee exemption.
Ginsburg asked if that issue would remain open if GSK lost its case on the outside sales exemption. Clement said it would be open, although he said resolving the administrative exemption involves an argument that employees following scripted statements—because of industry concern about Food and Drug Administration prosecutions for off-label uses of medicines—no longer exercise the judgment and discretion required to be administrative employees.
“The problem,” Clement said, “is the Labor Department, instead of looking at this and making a rational judgment about labor policy and whether these individuals who make $93,000 … should rationally be the kind of workers that are protected by the Fair Labor Standards Act, instead, they’re looking at things that have everything to do with FDA regulation and nothing to do with labor policy.”
Clement urged the justices to consider carefully the negative consequences of imposing liability on the pharmaceutical industry.
“You have massive liability, between 4 and 6 years of effective time and a half, because of the way that the statute works. It has time and a half plus liquidated damages. You are talking about people who are very well paid, close to six figures. So unlike the classic worker who you might think is covered by the FLSA, who is a relatively low hourly worker, the amounts of damages here are quite significant.”
A decision in the case is expected by the end of the court’s term, in late June. 04.18.2012
Finally after several years of waiting, The California Supreme Court on Thurs., April 12 ruled in Brinker Restaurant Corp. v. Supreme Court of San Diego County that employers are not under an obligation to make sure their workers take legally required lunch and rest breaks.
The Brinker case is very important in that it finally answered the question on whether California employers have to simply make meal and rest breaks available or enforce that they are taken.
This is a very important case for California employers because it affects thousands of businesses and millions of workers and the court’s decision will have an impact on reducing the numerous class-action lawsuits surrounds this issue that has cost California companies millions of dollars in legal fees.
In the Brinker decision decided today, the California Supreme Court sided with businesses when it ruled that requiring companies to order breaks is unmanageable and those decisions should be left to workers. The Court explained in its decision that state law does not compel an employer to ensure employees cease all work during meal periods, instead saying the employee is at liberty to use the time as they choose.
Although California state law has mandated meal and rest breaks for several decades, it wasn’t until 2001 that California became one of only a few states that impose a monetary penalty for employers who violate these laws requiring employers to pay one hour of wages for a missed half-hour meal period. The lawsuits began growing by exponential numbers from that point.
NOTE: There is no federal law requiring employers to provide such breaks.
In case you haven’t heard, the new required NLRB poster has been placed on hold again. f you have already posted the separate 11×17 NLRA Employee Rights poster which was supposed to have been posted by April 30, you should remove it at this time and put it to the side for the time being.
The reason for the latest hold is that on April 17th, the U.S. Court of Appeals for the District of Columbia Circuit stopped the National Labor Relations Board (NLRB) from enforcing a regulation that would have required most private sector employers in the United States to post a notice of employee labor law rights beginning April 30 (Nat’l Ass’n of Mfrs. v. NLRB, D.C. Cir., No. 12-5068, injunction pending appeal 4/17/12).
In response to the action, NLRB announced its regional offices will not implement the disputed rule, but the agency will defend the rule in the D.C. Circuit and plans to appeal an adverse ruling that was issued April 13 by a federal court in South Carolina.
The notice-posting rule would apply to any employer covered by the National Labor Relations Act, excluding states or political subdivisions not subject to board jurisdiction. The NLRB has estimated that the “great majority” of 6 million small businesses in the United States would be required to comply with the regulation by posting a notice of NLRA rights. The regulation also requires employers that customarily communicate with employees on internet or intranet sites to post the NLRB notice electronically.
The rule was suggested to the board in a 1993 petition for rulemaking by Charles J. Morris, now professor emeritus of Southern Methodist University’s Dedman School of Law. A divided NLRB proposed the regulation in December 2010 (244 DLR AA-1, 12/21/10) and published a final rule in August 2011 (76 Fed. Reg. 54,006; 165 DLR AA-1, 8/25/11).
NLRB’s final rule provides that an employer that fails or refuses to post the required notice would violate Section 8(a)(1) of the act, which proscribes employer action “to interfere with, restrain or coerce employees” in their exercise of rights guaranteed by the NLRA.
The final rule also provides that although Section 10(b) of the NLRA, generally precludes the issuance of an unfair labor practice complaint based on conduct occurring more than six months before the filing and service of an administrative charge with the agency, “the Board may find it appropriate” when an individual employee files a charge against an employer “to excuse the employee from the requirement that charges be filed within six months after the occurrence of the allegedly unlawful conduct.”
Tolling the statute of limitations would be appropriate “if the employer has failed to post the required employee notice unless the employee has received actual or constructive notice that the conduct complained of is unlawful,” the rule provides.
The rule originally was set by NLRB to become effective in November 2011. The agency postponed the effective date to Jan. 31, 2012, and then extended the date to April 30, after Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia expressed concern that she did not have enough time to determine the rule’s legality before its original scheduled effective date.
In the first of two district court rulings on the NLRB rule, Jackson rejected most of the National Association of Manufacturers’ challenge to the NLRB regulation (Nat’l Ass’n of Mfrs. v. NLRB, 2012 BL 58223, 192 LRRM 2999 (D.D.C. 2012)).
Jackson generally upheld the rule against challenges brought by NAM, the National Right to Work Legal Defense and Education Fund Inc., the Coalition for a Democratic Workplace, the National Federation of Independent Business, and several small businesses.
Finding that the NLRA gives the board a “broad, express grant of rulemaking authority,” Jackson rejected claims that the board’s decision to require the posting was arbitrary and capricious.
But Jackson found that two portions of the rule could not be enforced by NLRB.
She concluded that the board exceeded its statutory authority in promulgating a provision that would treat any failure to post the required notice as an unfair labor practice under the act. Jackson also held that a provision tolling the NLRA’s statute of limitations in any case at a job site where an employer failed to post the mandated notice was inconsistent with the language of the statute.
In its statement on the appellate court injunction, NLRB said it supported Jackson’s ruling that the board had statutory authority to adopt a notice-posting requirement. The agency said, however, it will appeal the district court’s rulings on the rule’s enforcement provisions.
NAM and the other plaintiffs in the District of Columbia lawsuit asked Jackson to block enforcement of the NLRB rule while they pursued an appeal to the D.C. Circuit, but she denied the request.
The groups then filed their appeal as well as an emergency motion asking the appeals court to enjoin the board from enforcing the rule pending resolution of the appeal.
NLRB opposed a delay in enforcement of the regulation, arguing that the groups did not show they will prevail in the D.C. Circuit or that any irreparable harm would result if the rule went into effect as scheduled and was later struck down by the appellate court.
But Judges David S. Tatel, Janice Rogers Brown, and Brett M. Kavanaugh said in a per curiam opinion that “uncertainty” about enforcement of the rule “counsels further in favor of temporarily preserving the status quo while this court resolves all of the
issues on the merits.”
The D.C. Circuit cited the ruling by the District of South Carolina, as well as recent board action postponing implementation of the rule.
“That postponement is in some tension with the Board’s current argument that the rule should take effect during the pendency of this court’s proceedings before this court has an opportunity to … consider the legal merits,” the appeals court said.
The D.C. Circuit enjoined NLRB from implementing the regulation pending appeal, and ordered an expedited briefing schedule, beginning with a May 15 due date for the filing of briefs challenging the NLRB rule. The court directed the clerk of court to schedule an oral argument in September.
In the lawsuit filed by the U.S. Chamber of Commerce and the South Carolina Chamber of Commerce, Judge David C. Norton took a different view of the NLRB regulation and the board’s authority to adopt it (Chamber of Commerce v. NLRB, D.S.C., No. 11-cv-2516).
Reviewing the text of the NLRA, including Section 8’s prohibition on unfair labor practices and Section 9, giving the board authority over representation case issues, the court said “the NLRA does not require employers to post general notices of employee rights under the Act.”
Norton said Section 6 of the act only supports regulations that are “necessary to carry out” other NLRA provisions. “It can be said that the notice-posting rule ‘aids’ or ‘furthers’ the aspirational goals of Section 1 by notifying employees of their rights under Section 7,” Norton wrote, “but defendants have not shown that the rule is ‘necessary’ to carry out any other provision of the Act.”
Norton wrote, “the court finds that Congress did not intend to impose a notice-posting obligation on employers, nor did it explicitly or implicitly delegate authority to the Board to regulate employers in this manner.”
NLRB said it disagrees with the ruling in Chamber of Commerce v. NLRB and will file an appeal. 04.18.2012.
explained. Illegal deductions from workers’ wages for uniforms, breakages, customer walkouts (instances of people leaving without paying for meals), and cash register shortages also are common, DOL said. The agency added that previous investigations revealed child labor violations, including allowing minors to operate hazardous equipment like dough mixers and meat slicers. 04.10.2012.
The U.S. Department of Justice (DOJ) March 22 announced that it has settled pattern or practice citizenship discrimination charges against Ross Stores Inc. in a case alleging that the company required noncitizen employees to produce more documents than necessary during the employment eligibility verification process.
The case stems from the complaint of a noncitizen employee at the company’s Ross Dress for Less store in San Ysidro, CA., who claimed that she presented a valid employment authorization document, but the company required her to produce more or different documents and eventually withdrew her job offer when she did not comply.
The DOJ alleged that Ross Stores subjected noncitizens to “excessive demands for documents issued by the Department of Homeland Security” to verify their employment eligibility. Such documents were not required of U.S. citizen employees, it said.
“Employers must not treat authorized workers differently during the employment eligibility verification process based on their citizenship status or national origin,” Assistant Attorney General for the Civil Rights Division Thomas Perez said in a statement. “The department is committed to ensuring authorized workers are treated fairly during the employment eligibility verification process.”
Under the settlement, Ross Stores agreed to reinstate the employee and pay her $6,384 in back pay, including interest. It also agreed to $10,825 in civil penalties to the United States.
The settlement also includes an agreement that the company will not discriminate or retaliate and will review its employment policies to ensure they comply with immigration law. Ross Stores also agreed to provide training for its human resources staff. 04.09.2012
Workers, job applicants, students, and higher education institution applicants in California would not have to accede to employer or school official demands that they turn over their social media passwords under a bill, S. 1349, reintroduced March 27 in the California Senate.
The bill started life as a measure to require child abuse reporting by schools when it was first introduced Feb. 24 by Sen. Leland Yee (D). Yee subsequently amended the bill to substitute its new focus as the “Social Media Privacy Act.”
“It is completely unacceptable for an employer to invade someone’s personal social media accounts,” Yee said in a March 27 statement. “Not only is it entirely unnecessary, it is an invasion of privacy and unrelated to one’s work performance or abilities.”
The bill’s roots as a bill focused on the education sector are demonstrated in its inclusion not only of a ban on workplace-related requests for social media passwords but also post-secondary school requests to students for their passwords.
The bill would prohibit employers and school officials from demanding, or requesting in writing, that covered individuals turn over social media user names or account passwords.
In addition, the proposed law would ban employers and school officials from forcing a covered individual to “otherwise provide the institution or employer with access to any content of that account,” such as by forcing the individual to log on to an account which the employer or school official could then review.
Meanwhile, bills to restrict employer access to social media accounts are pending in Illinois, Maryland, Minnesota, and New York.
At the federal level, Sens. Richard Blumenthal (D-Conn.) and Charles Schumer (D-N.Y.), have called on the Department of Justice and Equal Employment Opportunity Commission to investigate the legality of employer requests for passwords. 04.09.2012
After identifying nearly 15,000 employer locations with higher-than-average injury and illness rates, the Occupational Safety and
Health Administration has sent out letters to inform them that they are part of the agency’s Site-Specific Targeting Program (SST). In a change from prior years, OSHA plans to gauge the SST program’s effectiveness by selecting 420 establishments without their knowledge, dividing them into groups, and comparing changes in their injury and illness rates based on whether or not
they receive the letter or actually get inspected. The OSHA letter warns the employers identified for the program that up to 2,500 of them will be inspected, and it advises them on how to obtain assistance in reducing their workplace hazards. 04.08.2012.