On Wednesday, October 14, 2009, the Secretary of Labor submitted an amicus curiae brief supporting the position of over 2,500 pharmaceutical sales representatives seeking payment for overtime. The brief claims that the U.S. District Court for the Southern District of New York erred when it found that Novartis Pharmaceutical sales representatives are exempt from the overtime provisions of the Fair Labor Standards Act (“FLSA”).
At issue is whether the sales representatives were exempt under either the “outside sales” or “administrative” exemptions. While pharmaceutical sales representatives engage in a number of activities similar to an “outside salesman,” no actual sales take place. In fact, such sales are prohibited by federal law. The sales actually take place between the pharmacy and Novartis. According to the Department of Labor, the exemption in the FLSA requires the employee to actually make sales. Since no sales are made, the representatives do not meet the qualifications for the “outside sales” exemption.
Regarding the claim that the representatives satisfy the “administrative” exemption, the Department of Labor states that the representatives are not permitted to “exercise discretion and independent judgment with respect to matters of significance,” as required by the exemption. The representatives are told who to call, given calling goals, and are required to use company scripts, manuals, brochures, and other materials. If a physician asks a question not covered by the materials, the representative must either dodge the question by referring back to the provided materials or direct the physician to the company’s medical experts.
The import of the Second Circuit’s decision will be significant, as if the Department of Labor’s position is accepted the result should be a reclassification of a large number of pharmaceutical sales representatives across the industry. It would also mean that the effected employees should promptly seek legal counsel to determine what unpaid overtime they might be entitled to receive.
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