Labor Dept: Sales Reps Should Be Paid Overtime

Novartis sales reps fighting for overtime pay just got a powerful ally. The US Department of Labor filed an amicus brief with a federal appeals court contending that a lower court was wrong to toss their lawsuit, The Pink Sheet’s Brenda Sandburg reports.

In an Oct. 13 filing, the department argued the district court “committed legal error” in concluding that sales reps are outside sales persons and, therefore, are exempt from overtime requirements of the Fair Labor Standards Act (here is the Labor Department brief).

“Because the reps do not sell any drugs or obtain any orders for drugs, and can at most obtain from the physicians a non-binding commitment to prescribe [Novartis’] drugs to their patients when appropriate, the reps do not meet the regulation’s plain and unmistakable requirement that their primary duty must be ‘making sales,’” the Labor Department stated.

The Labor Department also rejected the lower court’s finding that sales reps are exempt from overtime as administrative employees, the Pink Sheet writes. To qualify for the exemption, employees must exercise discretion and independent judgment “with respect to matters of significance.” The DOL said sales reps don’t have that kind of independence since they’re given lists of docs to visit and must present scripted messages.

“The fact that the DOL submitted an amicus brief is quite significant,” Jeremy Heisler, of Sanford Wittels & Heisler, who is representing the Novartis sales reps, tells the Pink Sheet. He notes that under Supreme Court precedent, an appeals court must give deference to Department of Labor regulations and briefs submitted on issues involving how those regs were created and are applied. He estimates Novartis owes about $100 million in overtime pay.

At least 16 drug makers have been sued by sales reps for overtime pay. The Novartis suit, which was filed in March 2006 and involves some 2,500 reps, was the first. The litigation, however, has taken a confusing path, because different district courts have reached opposite conclusions.

In the first rulings on the issue, a district court in California decided sales reps are outside salespeople and so not entitled to overtime pay. But the Labor Department noted, except for the Novartis case, district courts within the Second Circuit have concluded the outside sales exemption doesn’t apply to sales reps because they don’t make sales.

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