Labor & Employment Law

Exemptions Issues At The Heart Of Latest Drug Giant FLSA Class Action

By Mark E. Tabakman, Esq.

Sales representatives of Novartis Pharmaceutical Corporation who brought a class action have been determined to be exempt employees under the Fair Labor Standards Act, thus bringing an abrupt end (for the plaintiffs) to the litigation. Federal district court Judge Paul Crotty, sitting in the Southern District of New York, has ruled that these employees were “outside salespersons” and exempt under that provision. Then (although it did not have to reach the issue), the court also found that they were “administrative” employees, also exempt from overtime requirements.

The representatives argued that they did not make “sales” as that term is defined under the law. Note that there is a very technical, precise meaning given to the term “sales.” The judge rejected that argument, finding that they made sales by “obtaining commitments” to prescribe Company drugs from the physicians that they solicited. The judge noted that the workers were credited with sales and were compensated by incentive payments. Thus, under the FLSA (and New York State law), they were exempt outside salespersons.

The representatives contended they were not administrative employees because they lacked the requisite discretion and independent judgment. The judge rejected that as well, finding that their work directly related to general business operations and, in contrast to the contention, that the representatives did utilize discretion and independent judgment, with regard to matters of significance, the FLSA requirement.

There are 500 potential plaintiffs. They have vowed to appeal.

This is a tremendous victory for this employer and for employers in general. It shows that the administrative exemption can be successfully argued, as applicable to a class of workers. It demonstrates that perhaps the courts are viewing the discretion/independent judgment component of the exemption test with some real-world flexibility. That is precisely the necessary prescription.
 

Full post as published by Wage & Hour - Development & Highlights on February 18, 2009 (boomark / email).