Labor & Employment Law

A Disease Hits The Pharmaceutical Industry: A "Rash" Of Class Actions

By Mark E. Tabakman, Esq.

Pursuant to a decision by a federal court judge in Los Angeles, thousands of Ortho McNeil sales representatives will be given the opportunity to opt into a Fair Labor Standards Act class action, which will encompass the entire nation. The issue is whether they have been properly classified as exempt under the “outside salesman” exemption. There is not often litigation involving what kind of work constitutes outside sales, but the unique structure of the pharmaceutical industry has lent itself to these kinds of claims and these lawsuits are gaining a foothold. At stake is millions of dollars in unpaid overtime wages. Plaintiffs have also lodged similar class action suits against other pharmaceutical giants, such as Pfizer, Astra Zeneca and Johnson & Johnson, cases which are still pending.

In the Ortho-McNeil case, the judge granted what is referred to as a “conditional class certification” finding that the named plaintiff has established a modicum of similarity between himself and those seeking to join the suit. At a subsequent juncture in the case, the defendant will have another opportunity to show that there are sufficient dissimilarities such as to preclude continuing the certification of the class.

The sales representatives have, as their primary job function, the promotion of pharmaceutical products to health care providers. They allege that they are non-exempt because, technically, they do not sell anything. Their counsel claims that all they do is drop off brochures and information packages for doctors. If the representatives actually sold product, they would clearly be exempt as outside sales persons, but the allegation is that they do not sell anything.

A few days ago, a federal judge in New Jersey allowed an additional 211 sales representatives to join an action against Merck. Sales representatives have brought a similar lawsuit against Pfizer but the judge there has not yet rendered a decision on the scope of the class.
Once this ball starts rolling, it is hard for the “next” employer to stop it. It is plain that the pharmaceutical industry is under siege from these actions. If one class of plaintiffs succeeds in one action, whether in California, New Jersey or elsewhere, the ripples will be felt across the county. The best protection against this contingency obtaining is a proactive approach, designed to keenly scrutinize all employees classified as exempt, to ascertain if those designations actually pass muster under the revised FLSA regulations (and corresponding state laws).

Full post as published by Wage & Hour - Development & Highlights on September 20, 2007 (boomark / email).