The Law Office of Ryan Scott Nalley

One of the main articles in the Illinois Bar Journal this month was on the recent Second Circuit decision regarding whether a class of prescription drug "outside sales people" were subject to the the "outside salesperson" exemption or the "Administative" exemption from the overtime wage provisions of the Fair Labor Standards Act. 

In Novaritus   a class of 2,500 employees sued their employer for unpaid overtime wages.  The ouitside sales exemption exemption, in essence states that any salesperson that make sales away from a place of business (such as door to door) are exempt from overtime and minimum wage requirements of the Fair Labor Standards Act.  The Administrative exemption, like all the "white collar" exemptions, requires among other things, independance and descretion with regard to matters of significance.

 You have seen prescription sales people at the doctors office or medical clinic before.  They are always young, attractive, stylishly dressed in a business suit, and carrying a large brief case full of samples of the  newest pharmaceutical company concoctions.  But the court held that these unfortunates were not actually sales people, and that is correct.  They are more like lobbyists between the drug companies and the medical community.  They convince the doctors of why their drug should be prescibed to the patients, usually for for psychological disorders or insomnia, instead what the doctor ususally prescibes.  (Part of the oxycontin scandal was that these people were directed to target incompetent doctors in order to convince them that the drug was less addictive than the science showed).

However, in one of the amicus briefs to the appeal, the class had to apparently defend against high salary ranges in addition to Adminstrative exemption and outside sales exemption.  Novaritus tried to argue among other things that because these employees were so highly paid (more than most lawyers I know) they should not be entitled to overtime.  However, according to the FLSA, as long as an employee makes less than $100,000 a year, such employee can still be elegible for overtime.

The Court held for the sales people on the grounds that they obviously were not making "sales."  Instead these are merely promotional employees, and in fact, they are not authorized to sell any pharmaceuticals directly to doctors.  In reality they just advertise.

As far as for the Adminstrative exemption, the Court held that the employees did not qualify when applying four factors: 

1. they do not formulate and cannot change Novartis’s “core message”; are required to visit agiven physician a specified number of times; 2. they are required to promote a drug a given number of times; 3. are required to hold a specified number of promotional events; 4. and could not deviate from a script developed by Novartis for describing the drugs or Novaritus' "core message." 

The Court held that the only discretionary acts that the sales representatives did perform where deciding in what order to visit physicians’ offices, determining the best way to gain access to the offices, allocating their Novartis budgets for promotional events and deciding the best way to dispurse samples fell short of allowing the sale persons to exercise either discretion or independent judgment in the performance of their duties.