Labor & Employment Law

Novartis v. Lopes - cert denied in FLSA case

This morning the US Supreme Court denied certiorari in Novartis Pharmaceuticals Corp v. Lopes and in Schering Corp v. Kuzinski. [Details]

Plaintiffs, pharmaceutical sales representatives, in a class action sued the employer for violation of the Fair Labor Standards Act (FLSA) alleging failure to pay overtime. The trial court granted the employer's motion for summary judgment. The 2nd Circuit reversed.

Plaintiffs did not sell drugs, visiting physicians to encourage prescriptions of the employer's products and providing drug samples and information. The issue was whether the plaintiffs were outside salesmen or administrative employees exercising discretion and independent judgment, both exempt from the FLSA.

The 2nd Circuit thought it clear that the regulations, defining the term "sale" as involving a transfer of title and explained in the Preamble to the 2004 Final Rule as obtaining a commitment to buy, and defining and delimiting the term "outside salesmen" in connection with an employee's efforts to promote the employer's products, did far more than merely parrot the language of the FLSA. The court granted "controlling" deference to the Department of Labor Secretary's interpretations of her regulations, which the court found were not inconsistent or plainly erroneous with the regulations. The 2nd Circuit concluded the plaintiffs were not outside salesmen. With respect to the administrative exemption, the court noted that the Secretary stated that the regulations required a showing of a greater degree of discretion, and more authority to use independent judgment in matters of significance, than the employer allowed the plaintiffs.

The 2nd Circuit found it appropriate to defer to the Secretary's interpretation, even though it was advanced for the first time in an amicus brief.

[Ed. Note: The 9th Circuit reached the opposite conclusion in Christopher v. SmithKline (9th Cir 02/14/2011), finding that pharmaceutical sales representatives were exempt from FLSA overtime-pay requirements as "outside salesmen."]

Full post as published by Ross' Employment Law Blog on February 28, 2011 (boomark / email).