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SUPREME COURT OF THE UNITED STATES
_________________
No. 11–204
_________________
MICHAEL SHANE CHRISTOPHER, et al.,
PETITION- ERS
v. SMITHKLINE BEECHAM CORPORATION dba
GLAXOSMITHKLINE
on writ of certiorari to the united states
court of appeals for the ninth circuit
[June 18, 2012]
Justice Alito delivered the opinion of the
Court.
The Fair Labor Standards Act (FLSA) imposes
minimum wage and maximum hours requirements on employers, see 29
U. S. C. §§206–207 (2006 ed. and Supp.
IV), but those requirements do not apply to workers employed
“in the capacity of outside salesman,” §213(a)(1).
This case requires us to decide whether the term “outside
salesman,” as defined by Department of Labor (stocktickerDOL
or Department) regulations, encompasses pharmaceutical sales
representatives whose primary duty is to obtain nonbinding
commitments from physicians to prescribe their employ- er’s
prescription drugs in appropriate cases. We conclude that these
employees qualify as “outside salesm[e]n.”
I
A
Congress enacted the FLSA in 1938 with the
goal of “protect[ing] all covered workers from substandard
wages and oppressive working hours.”
Barrentine v.
Arkansas-Best Freight System, Inc.,
450
U.S. 728, 739 (1981); see also 29 U. S. C.
§202(a). Among other requirements, the FLSA obligates
employers to compensate employees for hours in excess of 40 per
week at a rate of 1½ times the employees’ regular
wages. See §207(a). The overtime compensation requirement,
however, does not apply with respect to all employees. See
§213. As relevant here, the statute exempts workers
“employed . . . in the capacity of outside
salesman.” §213(a)(1).[
1]
Congress did not define the term “outside
salesman,” but it delegated authority to the DOL to issue
regulations “from time to time” to “defin[e] and
delimi[t]” the term.
Ibid. The DOL promulgated such
regulations in 1938, 1940, and 1949. In 2004, following
notice-and-comment procedures, the DOL reissued the regulations
with minor amendments. See 69 Fed. Reg. 22122 (2004). The current
regulations are nearly identical in substance to the regulations
issued in the years immediately following the FLSA’s
enactment. See 29 CFR §§541.500–541.504 (2011).
Three of the DOL’s regulations are
directly relevant to this case: §§541.500, 541.501, and
541.503. We refer to these three regulations as the “general
regulation,” the “sales regulation,” and the
“promotion-work regulation,” respectively.
The general regulation sets out the definition
of the statutory term “employee employed in the capacity of
outside salesman.” It defines the term to mean “any
employee . . . [w]hose primary duty is . . .
making sales within the meaning of [ 29 U. S. C.
§203(k)]”[
2] and
“[w]ho is customarily and regularly engaged away from the
employer’s place or places of business in performing such
primary duty.”[
3]
§§541.500(a)(1)–(2). The referenced statutory
provision, 29 U. S. C. §203(k), states that
“ ‘[s]ale’ or ‘sell’ includes
any sale, exchange, contract to sell, consignment for sale,
shipment for sale, or other disposition.” Thus, un- der the
general regulation, an outside salesman is any employee whose
primary duty is making any sale, exchange, contract to sell,
consignment for sale, shipment for sale, or other disposition.
The sales regulation restates the statutory
definition of sale discussed above and clarifies that
“[s]ales within the meaning of [ 29 U. S. C.
§203(k)] include the transfer of title to tangible property,
and in certain cases, of tangible and valuable evidences of
intangible property.” 29 CFR §541.501(b).
Finally, the promotion-work regulation
identifies “[p]romotion work” as “one type of
activity often performed by persons who make sales, which may or
may not be exempt outside sales work, depending upon the
circumstances under which it is performed.” §541.503(a).
Promotion work that is “performed incidental to and in
conjunction with an employee’s own outside sales or
solicitations is exempt work,” whereas promotion work that is
“incidental to sales made, or to be made, by someone else is
not exempt outside sales work.”
Ibid.
Additional guidance concerning the scope of the
outside salesman exemption can be gleaned from reports issued in
connection with the DOL’s promulgation of regulations in 1940
and 1949, and from the preamble to the 2004 regulations. See Dept.
of Labor, Wage and Hour Division, Report and Recommendations of the
Presiding Officer at Hearings Preliminary to Redefinition (1940)
(hereinafter 1940 Report); Dept. of Labor, Wage and Hour Division,
Report and Recommendations on Proposed Revisions of Regulations,
Part 541 (1949) (hereinafter 1949 Report); 69 Fed. Reg.
22160–22163 (hereinafter Preamble). Although the DOL has
rejected proposals to eliminate or dilute the requirement that
outside salesmen make their own sales, the Department has stressed
that this requirement is met whenever an employee “in some
sense make[s] a sale.” 1940 Report 46; see also Preamble
22162 (reiterating that the exemption applies only to an employee
who “in some sense, has made sales”). And the DOL has
made it clear that “[e]xempt status should not depend”
on technicalities, such as “whether it is the sales employee
or the customer who types the order into a computer system and hits
the return button,” Preamble 22163, or whether “the
order is filled by [a] jobber rather than directly by [the
employee’s] own employer,” 1949 Report 83.
B
Respondent SmithKline Beecham Corporation is
in the business of developing, manufacturing, and selling
prescription drugs. The prescription drug industry is subject to
extensive federal regulation, including the now-familiar
requirement that prescription drugs be dispensed only upon a
physician’s prescription.[
4] In light of this requirement, pharmaceutical companies
have long focused their direct marketing efforts, not on the retail
pharmacies that dispense prescription drugs, but rather on the
medi- cal practitioners who possess the authority to prescribe the
drugs in the first place. Pharmaceutical companies promote their
prescription drugs to physicians through a process called
“detailing,” whereby employees known as
“detailers” or “pharmaceutical sales
representatives” provide information to physicians about the
company’s products in hopes of persuading them to write
prescriptions for the products in appropriate cases. See
Sorrell v.
IMS Health Inc., 564 U. S. ___, ___
(2011) (slip op., at 1–2) (describing the process of
“detailing”). The position of “detailer”
has existed in the pharmaceutical industry in substantially its
current form since at least the 1950’s, and in recent years
the industry has employed more than 90,000 detailers nationwide.
See 635 F.3d 383, 387, and n. 5, 396 (CA9 2011).
Respondent hired petitioners Michael Christopher
and Frank Buchanan as pharmaceutical sales representatives in 2003.
During the roughly four years when petitioners were employed in
that capacity,[
5] they were
responsible for calling on physicians in an assigned sales
territory to discuss the features, benefits, and risks of an
assigned portfolio of respondent’s prescription drugs.
Petitioners’ primary objective was to obtain a nonbinding
commitment[
6] from the
physician to prescribe those drugs in appropriate cases, and the
training that petitioners received underscored the importance of
that objective.
Petitioners spent about 40 hours each week in
the field calling on physicians. These visits occurred during
normal business hours, from about 8:30 a.m. to 5 p.m. Outside of
normal business hours, petitioners spent an additional 10 to 20
hours each week attending events, reviewing product information,
returning phone calls, responding to e-mails, and performing other
miscellaneous tasks. Petitioners were not required to punch a clock
or report their hours, and they were subject to only minimal
supervision.
Petitioners were well compensated for their
efforts. On average, Christopher’s annual gross pay was just
over $72,000, and Buchanan’s was just over $76,000.[
7] Petitioners’ gross pay
included both a base salary and incentive pay. The amount of
petitioners’ incentive pay was based on the sales volume or
market share of their assigned drugs in their assigned sales
territories,[
8] and this amount
was uncapped. Christopher’s incentive pay exceeded 30 percent
of his gross pay during each of his years of employment;
Buchanan’s exceeded 25 percent. It is undisputed that
respondent did not pay petitioners time-and-a-half wages when they
worked in excess of 40 hours per week.
C
Petitioners brought this action in the United
States District Court for the District of Arizona under 29
U. S. C. §216(b). Petitioners alleged that
respondent violated the FLSA by failing to compensate them for
overtime, and they sought both backpay and liquidated damages as
relief. Respondent moved for summary judgment, arguing that
petitioners were “employed . . . in the capacity of
outside salesman,” §213(a)(1), and therefore were exempt
from the FLSA’s overtime compensation requirement.[
9] The District Court agreed and
granted summary judgment to respondent. See App. to Pet. for Cert.
37a–47a.
After the District Court issued its order,
petitioners filed a motion to alter or amend the judgment,
contending that the District Court had erred in failing to accord
control- ling deference to the DOL’s interpretation of the
pertinent regulations. That interpretation had been announced in an
uninvited
amicus brief filed by the DOL in a similar action
then pending in the Second Circuit. See Brief for Secretary of
Labor as
Amicus Curiae in
In re Novartis Wage and
Hour Litigation, No. 09–0437 (hereinafter
Secretary’s
Novartis Brief). The District Court
rejected this argument and denied the motion. See App. to Pet. for
Cert. 48a–52a.
The Court of Appeals for the Ninth Circuit
affirmed. See 635 F.3d 383. The Court of Appeals agreed that the
DOL’s interpretation[
10] was not entitled to controlling deference. See
id., at 393–395. It held that, because the commitment
that petitioners obtained from physicians was the maximum possible
under the rules applicable to the pharmaceutical industry,
petitioners made sales within the meaning of the regulations. See
id., at 395–397. The court found it significant,
moreover, that the DOL had previously interpreted the regulations
as requiring only that an employee “ ‘in some
sense’ ” make a sale, see
id., at
395–396 (emphasis deleted), and had “acquiesce[d] in
the sales practices of the drug industry for over seventy
years,”
id., at 399.
The Ninth Circuit’s decision conflicts
with the Second Circuit’s decision in
In re Novartis
Wage and Hour Litigation, 611 F.3d 141, 153–155 (2010)
(holding that the DOL’s interpretation is entitled to
controlling deference). We granted certiorari to resolve this
split, 565 U. S. ___ (2011), and we now affirm the judgment of
the Ninth Circuit.
II
We must determine whether pharmaceutical
detailers are outside salesmen as the DOL has defined that term in
its regulations. The parties agree that the regulations themselves
were validly promulgated and are therefore entitled to deference
under
Chevron U. S. A. Inc. v.
Natural
Resources Defense Council, Inc.,
467 U.S.
837 (1984). But the parties disagree sharply about whether the
DOL’s interpretation of the regulations is owed deference
under
Auer v.
Robbins,
519 U.S.
452 (1997). It is to that question that we now turn.
A
The DOL first announced its view that
pharmaceutical detailers are not exempt outside salesmen in an
amicus brief filed in the Second Circuit in 2009, and the
Department has subsequently filed similar
amicus briefs in
other cases, including the case now before us.[
11] While the DOL’s ultimate conclusion
that detailers are not exempt has remained unchanged since 2009,
the same cannot be said of its reasoning. In both the Second
Circuit and the Ninth Circuit, the DOL took the view that “a
‘sale’ for the purposes of the outside sales exemption
requires a con- summated transaction directly involving the
employee for whom the exemption is sought.” Secretary’s
Novartis Brief 11; see also Brief for Secretary of Labor as
Amicus Curiae in No. 10–15257 (CA9), p. 12. Perhaps
because of the nebulous nature of this “consummated
transaction” test,[
12]
the Department changed course after we granted certiorari in this
case. The Department now takes the position that “[a]n
employee does not make a ‘sale’ for purposes of the
‘outside salesman’ exemption unless he actually
transfers title to the property at issue.” Brief for United
States as
Amicus Curiae 12–13 (hereinafter U. S.
Brief).[
13] Petitioners and
the DOL assert that this new interpretation of the regulations is
entitled to controlling deference. See Brief for Petitioners
31–42; U. S. Brief 30–34.[
14]
Although
Auer ordinarily calls for
deference to an agency’s interpretation of its own ambiguous
regulation, even when that interpretation is advanced in a legal
brief, see
Chase Bank USA, N. A. v.
McCoy, 562
U. S. ___, ___ (2011) (slip op., at 12);
Auer, 519
U. S., at 461–462, this general rule does not apply in
all cases. Deference is undoubtedly inappropriate, for example,
when the agency’s interpretation is
“ ‘plainly erroneous or inconsistent with the
regulation.’ ”
Id., at 461 (quoting
Robertson v.
Methow Valley Citizens Council,
490 U.S.
332, 359 (1989)). And deference is likewise unwarranted when
there is reason to suspect that the agency’s interpretation
“does not reflect the agency’s fair and considered
judgment on the matter in question.”
Auer,
supra, at 462; see also,
e.g., Chase Bank,
supra, at ___ (slip op., at 14). This might occur when the
agency’s interpretation conflicts with a prior
interpretation, see,
e.g., Thomas Jefferson Univ. v.
Shalala,
512 U.S.
504, 515 (1994), or when it appears that the interpretation is
nothing more than a “convenient litigating position,”
Bowen v.
Georgetown Univ. Hospital,
488 U.S.
204, 213 (1988), or a “ ‘
post hoc
rationalizatio[n]’ advanced by an agency seeking to defend
past agency action against attack,”
Auer,
supra, at 462 (quoting
Bowen,
supra, at 212;
alteration in original).
In this case, there are strong reasons for
withholding the deference that
Auer generally requires.
Petitioners invoke the DOL’s interpretation of ambiguous
regulations to impose potentially massive liability on respondent
for conduct that occurred well before that interpretation was
announced. To defer to the agency’s interpretation in this
circumstance would seriously undermine the principle that agencies
should provide regulated parties “fair warning of the conduct
[a regulation] prohibits or requires.”
Gates & Fox
Co. v.
Occupational Safety and Health Review
Comm’n, 790 F.2d 154, 156 (CADC 1986) (Scalia,
J.).[
15] Indeed, it would
result in precisely the kind of “unfair surprise”
against which our cases have long warned. See
Long Island Care
at Home, Ltd. v.
Coke,
551 U.S.
158, 170–171 (2007) (deferring to new interpretation that
“create[d] no unfair surprise” because agency had pro-
ceeded through notice-and-comment rulemaking);
Martin v.
Occupational Safety and Health Review Comm’n,
499 U.S.
144, 158 (1991) (identifying “adequacy of notice to
regulated parties” as one factor relevant to the
reasonableness of the agency’s interpretation);
NLRB
v.
Bell Aerospace Co.,
416 U.S.
267, 295 (1974) (suggesting that an agency should not change an
interpretation in an adjudicative proceeding where doing so would
impose “new liability . . . on individuals for past
actions which were taken in good-faith reliance on [agency]
pronouncements” or in a case involving “fines or
damages”).
This case well illustrates the point. Until
2009, the pharmaceutical industry had little reason to suspect that
its longstanding practice of treating detailers as exempt outside
salesmen transgressed the FLSA. The statute and regulations
certainly do not provide clear notice of this. The general
regulation adopts the broad statutory definition of
“sale,” and that definition, in turn, employs the broad
catchall phrase “other disposition.” See 29 CFR
§541.500(a)(1). This catchall phrase could reasonably be
construed to encompass a nonbinding commitment from a physician to
prescribe a particular drug, and nothing in the statutory or
regulatory text or the DOL’s prior guidance plainly requires
a contrary reading. See Preamble 22162 (explaining that an employee
must “in some sense” make a sale); 1940 Report 46
(same).
Even more important, despite the
industry’s decades-long practice of classifying
pharmaceutical detailers as exempt employees, the DOL never
initiated any enforcement actions with respect to detailers or
otherwise suggested that it thought the industry was acting
unlawfully.[
16] We
acknowledge that an agency’s enforcement decisions are
informed by a host of factors, some bearing no relation to the
agency’s views regarding whether a violation has occurred.
See,
e.g., Heckler v.
Chaney,
470
U.S. 821, 831 (1985) (noting that “an agency decision not
to enforce often involves a complicated balancing of a number of
factors which are peculiarly within its expertise”). But
where, as here, an agency’s announcement of its
interpretation is preceded by a very lengthy period of conspicuous
inaction, the potential for unfair surprise is acute. As the
Seventh Circuit has noted, while it may be “possible for an
entire industry to be in violation of the [FLSA] for a long time
without the Labor Department noticing,” the “more
plausible hypothesis” is that the Department did not think
the industry’s practice was un- lawful.
Yi v.
Sterling Collision Centers, Inc., 480 F.3d 505,
510–511 (2007). There are now approximately 90,000
pharmaceutical sales representatives; the nature of their work has
not materially changed for decades and is well known; these
employees are well paid; and like quintessential outside salesmen,
they do not punch a clock and often work more than 40 hours per
week. Other than acquiescence, no explanation for the DOL’s
inaction is plausible.
Our practice of deferring to an agency’s
interpretation of its own ambiguous regulations undoubtedly has
important advantages,[
17]
but this practice also creates a risk that agencies will promulgate
vague and open-ended regulations that they can later interpret as
they see fit, thereby “frustrat[ing] the notice and
predictability purposes of rulemaking.”
Talk America,
Inc. v.
Michigan Bell Telephone Co., 564 U. S.
___, ___ (2011) (Scalia, J., concurring) (slip op., at 3); see also
Stephenson & Pogoriler,
Seminole Rock’s Domain, 79
Geo. Wash. L. Rev. 1449, 1461–1462 (2011); Manning,
Constitutional Structure and Judicial Deference to Agency
Interpretations of Agency Rules, 96 Colum. L. Rev. 612,
655–668 (1996). It is one thing to expect regulated parties
to conform their conduct to an agency’s interpretations once
the agency announces them; it is quite another to require regulated
parties to divine the agency’s interpretations in advance or
else be held liable when the agency announces its interpretations
for the first time in an enforcement proceeding and demands
deference.
Accordingly, whatever the general merits of
Auer deference, it is unwarranted here. We instead accord
the Department’s interpretation a measure of deference
proportional to the “ ‘thoroughness evident in its
consideration, the validity of its reasoning, its consistency with
earlier and later pronouncements, and all those factors which give
it power to persuade.’ ”
United States v.
Mead Corp.,
533 U.S.
218, 228 (2001) (quoting
Skidmore v.
Swift &
Co.,
323 U.S.
134, 140 (1944)).
B
We find the DOL’s interpretation of its
regulations quite unpersuasive. The interpretation to which we are
now asked to defer—that a sale demands a transfer of
title—plainly lacks the hallmarks of thorough consideration.
Because the DOL first announced its view that pharmaceutical sales
representatives do not qualify as outside salesmen in a series of
amicus briefs, there was no opportunity for public comment,
and the interpretation that initially emerged from the
Department’s internal decisionmaking process proved to be
untenable. After arguing successfully in the Second Circuit and
then unsucess- fully in the Ninth Circuit that a sale for present
purposes simply requires a “consummated transaction,”
the DOL advanced a different interpretation in this Court. Here,
the DOL’s brief states unequivocally that “[a]n
employee does not make a ‘sale’ for purposes of the
‘outside salesman’ exemption unless he actually
transfers title to the property at issue.” U. S. Brief
12–13.
This new interpretation is flatly inconsistent
with the FLSA, which defines “sale” to mean,
inter
alia, a “consignment for sale.” A
“consignment for sale” does not involve the transfer of
title. See,
e.g., Sturm v.
Boker,
150 U.S.
312, 330 (1893) (“The agency to sell and return the
proceeds, or the specific goods if not sold . . . does
not involve a change of title”); Hawkland, Consignment
Selling Under the Uniform Commercial Code, 67 Com. L. J. 146,
147 (1962) (explaining that “ ‘[a] consignment of
goods for sale does not pass the title at any time, nor does it
contemplate that it should be passed’ ” (quoting
Rio Grande Oil Co. v.
Miller Rubber Co. of
N. Y., 31 Ariz. 84, 87, 250 P. 564, 565 (1926))).
The DOL cannot salvage its interpretation by
arguing that a “consignment for sale” may
eventually result in the transfer of title (from the
consignor to the ultimate purchaser if the consignee in fact sells
the good). Much the same may be said about a physician’s
nonbinding commitment to prescribe a particular product in an
appropriate case. In that situation, too, agreement may eventually
result in the transfer of title (from the manufacturer to a
pharmacy and ultimately to the patient for whom the drug is
prescribed).
In support of its new interpretation, the DOL
relies heavily on its sales regulation, which states in part that
“[s]ales [for present purposes]
include the transfer
of title to tangible property,” 29 CFR §541.501(b)
(emphasis added). This regulation, however, provides little support
for the DOL’s position. The DOL reads the sales regulation to
mean that 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. The
sentence just subsequent to the one on which the DOL relies,
echoing the terms of the FLSA, makes clear that a
“consignment for sale” qualifies as a sale. Since a
consignment for sale does not involve a transfer of title, it is
apparent that the sales regulation does not mean that a sale must
include a transfer of title, only that transactions involving a
transfer of title are included within the term
“sale.”
Petitioners invite us to look past the
DOL’s “determination that a sale must involve the
transfer of title” and instead defer to the
Department’s “explanation that obtaining a non-binding
commitment to prescribe a drug constitutes promotion, and not
sales.” Reply Brief for Petitioners 17. The problem with the
DOL’s interpretation of the promotion-work regulation,
however, is that it depends almost entirely on the DOL’s
flawed transfer-of-title interpretation. The promotion-work
regulation does not distinguish between promotion work and sales;
rather, it distinguishes between exempt promotion work and
nonexempt promotion work. Since promotion work that is performed
incidental to an employee’s own sales is exempt, the
DOL’s conclusion that pharmaceutical detailers perform only
nonexempt promotion work is only as strong as the reasoning
underlying its conclusion that those employees do not make sales.
For the reasons already discussed, we find this reasoning wholly
unpersuasive.
In light of our conclusion that the DOL’s
interpretation is neither entitled to
Auer deference nor
persuasive in its own right, we must employ traditional tools of
interpretation to determine whether petitioners are exempt outside
salesmen.
C
1
We begin with the text of the FLSA. Although
the provision that establishes the overtime salesman exemption does
not furnish a clear answer to the question before us, it provides
at least one interpretive clue: It exempts anyone “employed
. . .
in the capacity of [an] outside
salesman.” 29 U. S. C. §213(a)(1) (emphasis
added). “Capacity,” used in this sense, means
“[o]utward condition or circumstances; relation; character;
position.” Webster’s New International Dictionary 396
(2d ed. 1934); see also 2 Oxford English Dictionary 89 (def. 9)
(1933) (“Position, condition, character, relation”).
The statute’s emphasis on the “capacity” of the
employee counsels in favor of a functional, rather than a formal,
inquiry, one that views an employee’s responsibilities in the
context of the particular industry in which the employee works.
The DOL’s regulations provide additional
guidance. The general regulation defines an outside salesman as an
employee whose primary duty is “making sales,” and it
adopts the statutory definition of “sale.” 29 CFR
§541.500(a)(1)(i). This definition contains at least three
important textual clues. First, the definition is introduced with
the verb “includes” instead of “means.”
This word choice is significant because it makes clear that the
examples enumerated in the text are intended to be illustrative,
not exhaustive. See
Burgess v.
United States,
553 U.S.
124, 131, n. 3 (2008) (explaining that “[a] term
whose statutory definition declares what it ‘includes’
is more susceptible to extension of meaning . . . than
where . . . the definition declares what a term
‘means’ ” (alteration in original; some
internal quotation marks omitted)). Indeed, Congress used the
narrower word “means” in other provisions of the FLSA
when it wanted to cabin a definition to a specific list of
enumerated items. See,
e.g., 29 U. S. C.
§203(a) (“ ‘Person’
means an
individual, partnership, association, corporation, business trust,
legal representative, or any organized group of persons”
(emphasis added)).
Second, the list of transactions included in the
statu- tory definition of sale is modified by the word
“any.” We have recognized that the modifier
“any” can mean “different things depending upon
the setting,”
Nixon v.
Missouri Municipal
League,
541 U.S.
125, 132 (2004), but in the context of 29 U. S. C.
§203(k), it is best read to mean “ ‘one or
some indiscriminately of whatever kind,’ ”
United States v.
Gonzales,
520 U.S.
1, 5 (1997) (quoting Webster’s Third New International
Dictionary 97 (1976)). That is so because Congress defined
“sale” to include both the unmodified word
“sale” and transactions that might not be considered
sales in a technical sense, including exchanges and consignments
for sale.[
18]
Third, Congress also included a broad catchall
phrase: “other disposition.” Neither the statute nor
the regulations define “disposition,” but dictionary
definitions of the term range from “relinquishment or
alienation” to “arrangement.” See Webster’s
New International Dictionary 644 (def. 1(b)) (1927) (“[t]he
getting rid, or making over, of anything; relinquishment or
alienation”);
ibid. (def. 1(a)) (“[t]he
ordering, regulating, or administering of anything”); 3
Oxford English Dictionary,
supra, at 493 (def. 4)
(“[t]he action of disposing of, putting away, getting rid of,
making over, etc.”);
ibid. (def. 1) (“[t]he
action of setting in order, or condition of being set in order;
arrangement, order”). We agree with the DOL that the rule of
ejusdem generis should guide our interpretation of the
catchall phrase, since it follows a list of specific
items.[
19] But the limit the
DOL posits, one that would confine the phrase to dispositions
involving “contract[s] for the exchange of goods or services
in return for value,” see U. S. Brief 20, is much too
narrow, as is petitioners’ view that a sale requires a
“firm agreement” or “firm commitment” to
buy, see Tr. of Oral Arg. 64, 66. These interpretations would
defeat Congress’ intent to define “sale” in a
broad manner and render the general statutory language meaningless.
See
United States v.
Alpers,
338
U.S. 680, 682 (1950) (instructing that rule of
ejusdem
generis cannot be employed to “obscure and defeat the
intent and purpose of Congress” or “render general
words meaningless”). Indeed, we are hard pressed to think of
any contract for the exchange of goods or services in return for
value or any firm agreement to buy that would not also fall within
one of the specifically enumerated categories.[
20]
The specific list of transactions that precedes
the phrase “other disposition” seems to us to represent
an attempt to accommodate industry-by-industry variations in
methods of selling commodities. Consequently, we think that the
catchall phrase “other disposition” is most reasonably
interpreted as including those arrangements that are tantamount, in
a particular industry, to a paradigmatic sale of a commodity.
Nothing in the remaining regulations requires a
narrower construction.[
21]
As discussed above, the sales regulation instructs that sales
within the meaning of 29 U. S. C. §203(k)
“
include the transfer of title to tangible
property,” 29 CFR §541.501(b) (emphasis added), but this
regulation in no way limits the broad statutory definition of
“sale.” And although the promotion-work regulation
distinguishes between promotion work that is incidental to an
employee’s own sales and work that is incidental to sales
made by someone else, see §541.503(a), this distinction tells
us nothing about the meaning of “sale.”[
22]
2
Given our interpretation of “other
disposition,” it follows that petitioners made sales for
purposes of the FLSA and therefore are exempt outside salesmen
within the meaning of the DOL’s regulations. Obtaining a
nonbinding commitment from a physician to prescribe one of
respondent’s drugs is the most that petitioners were able to
do to ensure the eventual disposition of the products that
respondent sells.[
23] This
kind of arrangement, in the unique regulatory environment within
which pharmaceutical companies must operate, comfortably falls
within the catch- all category of “other
disposition.”
That petitioners bear all of the external
indicia of salesmen provides further support for our conclusion.
Petitioners were hired for their sales experience. They were
trained to close each sales call by obtaining the maximum
commitment possible from the physician. They worked away from the
office, with minimal supervision, and they were rewarded for their
efforts with incentive compensation. It would be anomalous to
require respondent to compensate petitioners for overtime, while at
the same time exempting employees who function identically to
petitioners in every respect except that they sell
physician-administered drugs, such as vaccines and other inject-
able pharmaceuticals, that are ordered by the physician directly
rather than purchased by the end user at a pharmacy with a
prescription from the physician.
Our holding also comports with the apparent
purpose of the FLSA’s exemption for outside salesmen. The
exemption is premised on the belief that exempt employees
“typically earned salaries well above the minimum wage”
and enjoyed other benefits that “se[t] them apart from the
nonexempt workers entitled to overtime pay.” Preamble 22124.
It was also thought that exempt employees performed a kind of work
that “was difficult to standardize to any time frame and
could not be easily spread to other workers after 40 hours in a
week, making compliance with the overtime provisions difficult and
generally precluding the potential job expansion intended by the
FLSA’s time-and-a-half overtime premium.”
Ibid.
Petitioners—each of whom earned an average of more than
$70,000 per year and spent between 10 and 20 hours outside normal
business hours each week performing work related to his assigned
portfolio of drugs in his assigned sales territory—are hardly
the kind of employees that the FLSA was intended to protect. And it
would be challenging, to say the least, for pharmaceutical
companies to compensate detailers for overtime going forward
without significantly changing the nature of that position. See,
e.g., Brief for PhRMA as
Amicus Curiae 14–20
(explaining that “key aspects of [detailers’] jobs as
they are currently structured are fundamentally incompatible with
treating [detailers] as hourly employees”).
3
The remaining arguments advanced by
petitioners and the dissent are unavailing. Petitioners contend
that detailers are more naturally classified as nonexempt
promotional employees who merely stimulate sales made by others
than as exempt outside salesmen. They point out that
respondent’s prescription drugs are not actually sold until
distributors and retail pharmacies order the drugs from other
employees. See Reply Brief for Petitioners 7. Those
employees,[
24] they reason,
are the true salesmen in the industry, not detailers. This
formalistic argument is inconsistent with the realistic approach
that the outside salesman exemption is meant to reflect.
Petitioners’ theory seems to be that an
employee is properly classified as a nonexempt promotional employee
whenever there is another employee who actually makes the sale in a
technical sense. But, taken to its extreme, petitioners’
theory would require that we treat as a nonexempt promotional
employee a manufacturer’s representative who takes an order
from a retailer but then transfers the order to a jobber’s
employee to be filled, or a car salesman who receives a commitment
to buy but then asks his or her assistant to enter the order into
the computer. This formalistic approach would be difficult to
reconcile with the broad language of the regulations and the
statutory definition of “sale,” and it is in
significant ten- sion with the DOL’s past practice. See 1949
Report 83 (explaining that the manufacturer’s representative
was clearly “performing sales work regardless of the fact
that the order is filled by the jobber rather than directly by his
own employer”); Preamble 22162 (noting that
“technological changes in how orders are taken and processed
should not preclude the exemption for employees who in some sense
make the sales”).
Petitioners additionally argue that detailers
are the functional equivalent of employees who sell a
“concept,” and they point to Wage and Hour Division
opinion letters, as well as lower court decisions, deeming such
employees nonexempt. See Brief for Petitioners 47–48. Two of
these opinions, however, concerned employees who were more
analogous to buyers than to sellers. See
Clements v.
Serco, Inc., 530 F.3d 1224, 1229–1230, n. 4 (CA10
2008) (explaining that, although military recruiters “[i]n a
loose sense” were “selling the Army’s
services,” it was the Army that would “pa[y] for the
services of the recruits who enlist”); Opinion Letter from
Dept. of Labor, Wage and Hour Division (Aug. 19, 1994), 1994 WL
1004855 (explaining that selling the “concept” of organ
donation “is similar to that of outside buyers who in a very
loose sense are sometimes described as selling their
employer’s ‘service’ to the person for whom they
obtain their goods”). And the other two opinions are likewise
inapposite. One concerned employees who were not selling a good or
service at all, see Opinion Letter from Dept. of Labor, Wage and
Hour Division (May 22, 2006), 2006 WL 1698305 (concluding that
employees who solicit charitable contributions are not exempt), and
the other concerned employees who were incapable of selling any
good or service because their employer had yet to extend an offer,
see Opinion Letter from Dept. of Labor, Wage and Hour Division
(Apr. 20, 1999), 1999 WL 1002391 (concluding that college
recruiters are not exempt because they merely induce qualified
customers to apply to the college, and the college “in turn
decides whether to make a contractual offer of its educational
services to the applicant”).
Finally, the dissent posits that the
“primary duty” of a pharmaceutical detailer is not
“to obtain a promise to prescribe a particular drug,”
but rather to “provid[e] information so that the doctor will
keep the drug in mind with an eye toward using it when
appropriate.”
Post, at 6. But the record in this case
belies that contention. Petitioners’ end goal was not merely
to make physicians aware of the medically appropriate uses of a
particular drug. Rather, it was to convince physicians actually to
prescribe the drug in appropriate cases. See App. to Pet. for Cert.
40a (finding that petitioners’ “primary objective was
convincing physicians to prescribe [respondent’s] products to
their patients”).
* * *
For these reasons, we conclude that
petitioners qualify as outside salesmen under the most reasonable
interpretation of the DOL’s regulations. The judgment of the
Court of Appeals is
Affirmed.