Federal Appeals Court Rules Pharmaceutical 'Sales' Reps Entitled to Overtime Pay

NEW YORK, July 6 /PRNewswire/ -- A unanimous United States Court of Appeals for the Second Circuit ruled today that pharmaceutical "sales" representatives whose primary job duty is to visit doctor's offices, drop off drug samples and announce pre-scripted messages describing their employer's pharmaceuticals, are entitled to overtime pay under federal, New York state and California law.  The appeals court vacated the judgment of the district court and held that the "Reps" are not subject to either the federal and state "outside sales" or "administrative" exemptions to overtime pay. In December, 2009 the United States Department of Labor filed an amicus appeal brief in support of the sales reps, a rare step for the DOL.

Jeremy Heisler of Sanford Wittels & Heisler, LLP, ("SWH") the law firm representing the Novartis Reps called the Second Circuit decision "extremely significant" both for the Novartis overtime litigation and also for a number of overtime lawsuits pharmaceutical sales reps are bringing against their employers throughout the country.

"In effect" commented Mr. Heisler, "the Second Circuit not only reversed the trial judge's dismissal of the Novartis Reps' overtime case, but has now held, as a matter of law, that Novartis owes its Reps overtime pay.  The Reps are not excluded from overtime pay under either the outside sales or administrative exemptions.  The only thing left to decide is how much Novartis owes."  The Novartis result is especially important, said Heisler, because it is the first federal appellate decision finding that the outside sales and administrative exemptions don't cover pharmaceutical sales reps. 

Katherine Kimpel, another SWH partner, noted that the United States Department of Labor, the agency delegated by Congress with the authority to issue regulations "defining and delimiting" exemptions from overtime pay, submitted an amicus brief in the Novartis appeal and argued that neither the outside sales nor administrative exemption should cover the Novartis sales Reps.  According to Ms. Kimpel, the Second Circuit, consistent with Supreme Court precedent, gave "controlling deference" to the Department's position that the Reps were non-exempt. 

David Sanford of SWH emphasized that the Second Circuit completely rejected Novartis' and the pharmaceutical industry's persistent contention that the Reps are "outside salespersons" and therefore exempt from overtime pay under federal and state law.  Sanford pointed to the Court's conclusion that when a pharmaceutical representative visits a doctor's office, drops off a sample and delivers a pre-scripted company message about his employer's drugs, "in no sense" is the Rep making a sale to the doctor within the meaning of federal and state overtime law and regulations. According to Sanford, the Court held that the Reps were promoting pharmaceuticals to the doctor and, as the decision stated, "a person who merely promotes a product that will be sold by another person does not, in any sense, intended by the [overtime] regulations make the sale." 

The Second Circuit also found that that Novartis Reps were not exempt "administrative" employees because the Reps were tightly controlled and therefore could not exercise either discretion or independent judgment in the performance of their primary duties, both of which are a preconditions to applying the administrative exemption.  The Court rebuffed Novartis' argument that the Reps were imbued with discretion because they were "free" to decide the sequence in which to visit doctor's offices, "free" to decide how best to gain access to those offices, "free" to decide how to allocate their Novartis budgets for promotional events, such as dinners, and "free" to determine how to allocate their samples.  The Court determined, however, that because the Reps play no role in: (1) planning Novartis's marketing strategy; (2) formulating the "pre-scripted core messages" they must deliver to physicians; and are required to: (a) visit a given physician a certain number of times per trimester; (b) promote a given drug a certain number of times per semester; and (c) hold a designated number of promotional events ordered by Novartis, the "four freedoms" advanced by Novartis did not show the Reps sufficiently exercised either discretion or independent judgment as required by the administrative exemption.

"By finding that the Novartis Reps are not exempt, and thus are entitled to overtime pay for hours above 40 worked in a week, the Second Circuit vindicated two of the main purposes of overtime laws: to prevent the evil of overwork and to spread work among as many employees as possible," said partner Steven Wittels of SWH.  Wittels also commented that the Second Circuit ruling accords with more than seven decades of case law dictating that exceptions to overtime pay must be narrowly construed.  "This appeal vindicates both the law and justice for Novartis' overworked sales Reps," said Wittels.

Sanford Wittels & Heisler is a law firm with offices in Washington, D.C., New York, and San Francisco that specializes in employment discrimination, wage and hour, consumer and complex corporate class action litigation and has represented thousands of individuals in some of the major class action cases in the United States. The firm also represents individual clients in employment, employment discrimination, sexual harassment, whistleblower, public accommodations, commercial, medical malpractice, and personal injury matters. More information at www.SWHlegal.com

SOURCE Sanford Wittels & Heisler, LLP