In re Novartis Wage & Hour Litigation
611 F.3d 141 (2d Cir. 2010)

Facts:

  • This was a class action against Novartis, a pharmaceutical company.
    • Plaintiffs alleged that under the FLSA and state law, they were entitled to overtime pay.
  • Novartis argued that the reps were outside salesmen and/or administrative employees and were thus exempt from the FLSA’s overtime pay requirements.
  • The reps argued that they didn’t actually sell any products to physicians – they basically just provided information and would encourage the physicians to proscribe the products.
  • Note: Their training and actual work, however, was extensive and highly regulated by Novartis.

History:
The district court granted Novartis’s motion for summary judgment on the ground that plaintiffs were outside salesmen and/or administrative employees.

Issues:
(1) Were the reps “outside salesmen?”
(2) Were the reps “administrative employees?”

Holdings:
No. Case reversed.

Reasoning:
(1) Outside Salesmen.

  • The term “employee employed in the capacity of outside salesman” in section 213(a)(1) of the Act shall mean any employee:

(1) Whose primary duty is:

(i) making sales within the meaning of section 3(k) of the Act, or
(ii) obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer…”

  • Furthermore, “sale” or “sell” includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.
  • Here, the reps merely promoted a product that was sold by another – the meetings were less than 5 minutes long, and they had no contact with wholesalers or the patients.

(2) Administrative Employees

  • To be such an administrative employee:

(1) The employee must earn at least $455 a week;
(2) His primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
(3) His primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.

  • Here, the third criterion was the key issue.
    • Novartis tried to argue that the reps had discretion and independent judgment by their ability to answer questions about the product, develop a rapport with a physician who has a certain social style, remember past conversations with a given physician, etc.
  • However the court rejected this because these were all skills gained through their Novartis training sessions and were exercised within severe limits imposed by Novartis: Reps
    • Have no role in planning Novartis’s marketing strategy;
    • Have no role in formulating the “core messages” they deliver to physicians;
    • Are required to visit a given physician a certain number of times per trimester as established by Novartis;
    • Are required to promote a given drug a certain number of times per trimester as established by Novartis;
    • Are required to hold at least the number of promotional events ordered by Novartis;
    • Are not allowed to deviate from the promotional “core messages”; and
    • Are forbidden to answer any question for which they have not been scripted.