Pharmaceutical Reps are Entitled to California Overtime Pay
On July 6, 2010, the Second U.S. Circuit Court of Appeals held that sales representatives for Novartis Pharmaceuticals Corporation are entitled to overtime pay under the Fair Labor Standards Act (FLSA). Many California employees of Novartis claimed that they were wrongfully denied overtime pay between March 23, 2000 and April 7, 2007. The representatives, who worked nine-hour days, made routine calls and visits to physicians inquiring as to whether they would prescribe the company’s products to patients. Under the FLSA, employees must be paid overtime for more than 40 hours worked per week, but there are exemptions for“outside” salespersons and “administrative” personnel.
The Court ruled that neither exemption applies to pharmaceutical reps because
(1) representatives only promote a product and do not make “sales”
(2) their activities are so tightly controlled by the company that they are not allowed to exercise independent judgment.
According to Secretary of Labor Hilda L. Solis, an employee who can merely promote a drug and provide samples, has not in fact made a “sale.” Judge Kearse agreed, stating that an employee who cannot “even obtain from the physician a binding agreement to prescribe it” has not made a sale.
Novartis contended that its representatives are exempt from overtime under the “administrative” exemption, because they are free to determine when they will visit a particular doctor and how best to earn their support, whether it be dinner, a sporting event, or some other activity. The Court rejected this argument because it failed to establish a freedom of discretion. It particularly noted that Novartis representatives have no control over the company’s marketing strategy. Furthermore, the company determines the physicians to be visited, the drugs to be recommended, and the promotional events to be held.
The ruling in this case is important because it is the first federal appellate decision addressing the outside sales and administrative exemptions as it applies to the pharmaceutical industry.
It also underlines the main purpose of California overtime law, which is to evenly divide work among employees.
If you are a pharmaceutical representative and have questions regarding your entitlement to California overtime pay, take action and call a knowledgeable California labor law attorney.
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