Sales Reps and Overtime Pay

Your company’s overtime pay policies are probably okay, at least for now. That’s because a recent Supreme Court decision says that current rules for overtime pay will stay in place.

Overtime Pay

The laws require most employers to pay overtime. The overtime premium is 50% of the employee’s usual hourly wage, or, “time-and-a-half.” For most states, the overtime rate starts after 40 hours in a week.

Certain employees are exempt from overtime pay rules. This has generally included outside sales representatives.

The Labor Dept. had sued pharmaceutical giant SmithKline Beecham, saying that the company’s outside sales representatives should be awarded overtime pay, because they were not actually selling products, but were only providing product information and advising.

The court said the law says workers can be considered sales reps if they are involved in a sale “in any sense.” The Labor Dept. argued for a stricter definition where the salesperson “actually transfers title to the property at issue.”

The justices admitted the law leaves discretion to government agencies to decide how to implement such laws, but businesses also have a right to be protected against sudden changes.

The court wrote that to accept the government’s view in this case “would result in the kind of “unfair surprise” against which our cases have long warned.”

The Court’s Impact

Business groups support the decision. They point out that the overtime laws, put in place in 1938, were meant to prevent workers from not being paid fairly for extra work. (More than 90,000 sales reps work in pharmaceutical sales. They usually put in more than 40 hours, but most make nearly $100,000 a year.)

The court’s ruling might also help slow the number of wage-and-hour cases that resulted in lower courts awarding overtime pay to such traditionally exempt employees as stockbrokers and loan officers.

The Bottom Line

Your overtime pay policies are likely okay, but it never hurts to ask some questions.

If you’re in doubt, seek the counsel of a reputable labor attorney.

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