Search This Blog

Sunday, February 12, 2012

Pharmaceutical Company Pays $99 Million to Settle Wage Misclassification Case

By: Tommy Eden, Attorney

On January 25, 2012, a federal district court in New York granted preliminary approval to a $99 million proposed settlement of a nationwide wage and hour Fair Labor Standards Act (FLSA) class action against Novartis Pharmaceuticals Corp., with a class of more than 7,000 current and former sales employees. (In re Novartis Wage & Hour Litigation) The case arises from a pair of 2006 lawsuits filed under the FLSA and California and New York laws. Class notices are being mailed out and a fairness hearing is set for May 31st in New York. This has been one of the most highly watched FLSA cases for the last five years by the pharmaceutical industry.

The proposed settlement agreement covers five subclasses of Novartis sales representatives who allege they were denied overtime pay in violation of the FLSA and state laws. In companion case, the U.S. Supreme Court has on its April argument calendar the case of Christopher v. Smith-KlineBeecham Corp. (Case No. 11-204 set for oral Argument on Monday April 16). The Smith-KlineBeecham case raising the issue of whether the FLSA's outside sales exemption exempts pharmaceutical sales representatives from overtime pay under federal law. The Department of Labor (DOL) has intervened in the case and argued its interpretation of wage and hour law that the sales representatives have been misclassified and are due overtime compensation.

Novartis claims that it has recently made significant changes to the job responsibilities for its pharmaceutical sales representatives so that they fall within the FLSA “administrative exemption” as their primary duty includes "the exercise of discretion and independent judgment with respect to matters of significance."

Common Sense Counsel: it may be time for an Employment Law Compliance Audit. This development is the latest challenge that employers face. With the DOL’s resources employers can expect to face additional pressure from the government and class-action attorneys. Wage and hour compliance is one of the most difficult problems for employers and a well drafted job description is the key to not being an easy target. 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 these areas in their job descriptions, policies and procedures before a government compliance officer, or FLSA federal court lawsuit, arrives at the door:
• classification of exempt, nonexempt, time clock rounding and independent contract workers;
• commissions, bonuses, incentive payments, and other compensation programs;
• overtime pay calculations;
• family and medical leave; and
• recordkeeping requirements.
Tommy Eden is a resident 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.