The Court, however, reasoned that even though the PSRs did not make actual sales, they were outside sales representatives under the FLSA. The highly regulated nature of the industry prevented the PSRs from making actual sales, but the nature of the work was such that the PSRs were essentially getting commitments from physicians to prescribe drugs, which was analogous to a sale. They were, therefore, exempt from overtime pay under the FLSA as an outside sales representative.
This case extends beyond the pharmaceutical industry and highlights the need for any company that utilizes sales representatives to have up-to-date and enforceable agreements that properly define the sales representative’s role. This decision also highlights a conflict among the federal courts on this issue, making it vitally important that a company using sales representatives understands the law of the territory in which its representatives operate. In addition to the application of federal labor laws, nearly every state has its own specific statute that governs sales representative relationships. Failure to follow these statutes can have serious and costly consequences.
If you utilize sales representatives, ask yourself the following:
- Have I defined when my sales representative’s compensation is earned and will be paid and does that comply with applicable law?
- Have I provided for the payment of earned compensation after termination of the sales representative and does that comply with applicable law?
- Will I be responsible for paying my sales representative for sales made after they are terminated?
- Do my sales representative agreements prevent my sales representatives from stealing my clients?
- Are my sales representatives employees or independent contractors, and have I complied with the applicable laws regarding both?
- Do my sales representative agreements protect my business, assets, clients, and livelihood?
The attorneys at McDonald Hopkins have extensive experience advising clients on sales representative issues. If you are unsure about the answer to any of the above questions, please contact:
James J. Giszczak
Timothy J. Lowe
We have an impressive team of labor and employment attorneys who specialize in representing management in all aspects of labor and employment law at both the state and federal level. They have significant expertise in counseling clients on labor, employment and human resources issues and representing employers in state and federal courts and administrative agencies in all aspects of labor and employment-related litigation.
Carl J. Grassi, President
600 Superior Avenue, East, Suite 2100, Cleveland, Ohio 44114
Columbus - North Fifth Street
Columbus - South High Street
West Palm Beach
IRS CIRCULAR 230 DISCLOSURE:
To ensure compliance with requirements imposed by the
Internal Revenue Service, we inform you that any tax advice
contained in this communication (including any attachments),
was not intended or written to be used, and cannot
be used, by any taxpayer for the purpose of (1) avoiding
any penalties under the Internal Revenue Code or (2) promoting,
marketing or recommending to another party any
transaction matter addressed herein.
© 2011 McDonald Hopkins LLC All Rights Reserved.
This Alert is designed to provide current information for our clients, friends
and their advisors regarding important legal developments. The foregoing discussion
is general information rather than specific legal advice. Because it is
necessary to apply legal principles to specific facts, always consult your legal
advisor before using this discussion as a basis for a specific action.