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Wednesday, March 9, 2011

U.S. Supreme Court Lets Stand Ruling that Pharmaceutical Sales Representatives Are Due Overtime Pay

By: Tommy Eden, Attorney

On February 28, 2010 the U.S. Supreme Court denied review of 2nd Circuit decision in which pharmaceutical sales representatives where found not to be exempt employees and thus entitled to receive overtime pay The Court announced its decision to deny certiorari in Novartis Pharmaceuticals Corp. v. Lopes et al as well as in Kuzinski v. Schering Corp (2d Cir. 2010), in which the 2nd U.S. Circuit Court of Appeals relied on Novartis and affirmed a district court decision determining that pharmaceutical sales representatives for Schering Corporation are not exempt under the outside sales exemption of the Fair Labor Standards Act (FLSA). This decision has far reaching implications and will affect every pharmaceutical sales representative in the U.S.

The 2nd Circuit ruled that pharmaceutical sales representatives for Novartis Pharmaceuticals Corporation do not meet the criteria for either the administrative or outside sales exemptions of the FLSA and are, thus, entitled to overtime pay for work in excess of 40 hours in a week. In their Opinion in Kuzinski v. Schering Corp. the 2nd Circuit gave controlling deference to an amicus curiae brief filed by the Department of Labor on behalf of the plaintiffs. The 2nd Circuit held that because pharmaceutical sales representatives are prohibited under federal law from actually entering into contracts to sell their employer’s prescription drug products, they do not qualify for the outside sales exemption, despite long-standing DOL acquiescence in the consistent practice in this highly regulated industry of treating these sales representatives as exempt. The court also held that the highly regulated nature of the pharmaceutical industry prevented these employees from exercising “sufficient” independent judgment and discretion to qualify for the administrative exemption.

Common Sense Counsel: time for Workplace Law Compliance Audit. With the DOL’s new resources of 250 investigators, employers can expect to face additional pressure from the government. Wage and hour compliance is one of the most difficult problems for employers. As employers try to stay competitive, employees may have a wider range of responsibilities causing the line between exempt and nonexempt employee classifications to blur. Alabama employers should review their policies and procedures before a government compliance officer, or a plaintiff’s attorney, arrives at their door:

• classification of exempt, nonexempt, and independent contract workers;
• commissions, bonuses, incentive payments, and other compensation programs;
• overtime pay calculations;
• family and medical leave;
• recordkeeping requirements; and
• well drafted job descriptions are a key in these audits.

Tommy Eden is a native of Auburn, an attorney with the local office of Capell & Howard, P.C. and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at or 334-501-1540.