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Second Circuit Strips Pharmaceutical Sales Reps of Their Exempt Status
The Second U.S. Circuit Court of Appeals recently held in In re Novartis Wage and Hour Litigation, No. 09-0437 (2nd Cir. July 6, 2010), that pharmaceutical sales representatives do not fall under any of the exemptions to overtime payment requirements under the Fair Labor Standards Act (“FLSA”). The court's decision exposes the two defendant pharmaceutical companies to significant damages in unpaid overtime as the result of having misclassified the employees and significantly impacts the classification of pharmaceutical sales representatives in the industry.
Background
Pharmaceutical sales representatives (“reps”) at Schering-Plough Corp. and Novartis Pharmaceutical Corp. brought two separate class actions in which they claimed that the companies had misclassified them as exempt employees who were not entitled to overtime pay. The reps claimed that they did not actually sell the companies' products, because medical professionals did not commit to purchasing or even prescribing the products in question, and the reps merely marketed the products according to a rote, highly standardized process. As a result, the reps claimed, they are not covered by either the “outside sales” or “administrative employee” exemptions to the FLSA overtime requirements.
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