In yet another victory for sales reps seeking overtime pay, a federal judge has ruled that the administrative exemption under the Fair Labor Standards Act does not apply to Schering-Plough reps. The ruling, though, is not surprising, given that the US Supreme Court recently chose not to hear an appeal of a lower-court finding of a similar ruling against Novartis (back story).
The FLSA discusses two exemptions. The overtime compensation requirement does not apply to employees who work as outside salespeople, but the law does require employers to pay overtime for hours worked beyond 40 hours a week, unless an exemption applies. What are those exemptions? If an employee’s primary duty is to obtain orders or contracts (as defined by the statute) and regularly does so away from the employer’s place of business. A federal court had already ruled against Schering-Plough on this point.
However, the drugmaker, which is now owned by Merck, sought to use the administrative exemption in order to avoid paying overtime. This exemption relieves employers from paying overtime to any employee who is employed in a bona fide executive, administrative, or professional capacity – and to employees earning over $455 a week whose primary duty is to perform office or non-manual work involving managerial or general business matters. A primary duty includes exercising discretion and independent judgment.
In her ruling, federal judge Janet Bond Arterton wrote that the “closest Schering reps come to consummating ’sales’ is increasing the overall demand for its products, such that (other) Schering employees negotiate and commit to contracts with wholesalers – not the physicians to whom Schering’s products are promoted. However, while reps do not ‘consummate’ the sales themselves, neither do they design the promotional materials to be used in their sales calls, not set the overall markets strategy for products, not develop the ‘core message’ to be delivered during meetings with health care professionals.”
And she then used an analogy from an earlier lawsuit about employees who work in clothing stores: the reps “are neither the employee who completes the transaction at the cash register nor the employee who designs advertisements for the store or decides when to reduce prices to attract customers.” In other words, the rep is more akin to someone who helps the customer find the right merchandise, but is not involved in the myriad decisions or activities that would preclude overtime pay (read the ruling here).
Sales reps recently won a similar victory against Boeheringer Ingelheim (see this) and, in general, have racked up several court victories on the overall overtime pay issue. And as reported previously, the US Department of Labor has sided with reps and filed briefs in their support, although some rulings have supported drugmakers, suggesting the issue could still wind up before the US Supreme Court (look here).
Nonetheless, a lawyer for the reps was jubilant. “This company has violated the labor law, and is now being held accountable by the Court. This is why our clients filed the lawsuit, Charles Joseph, an attorney who represented the sales reps, says in a statement. “Schering Plough pharmaceutical reps are owed a lot of money for the often extraordinarily long hours they work with no additional compensation. This is justice achieved.”