In re Novartis Wage & Hour Litigation
611 F.3d 141 (2d Cir. 2010)
- 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.
The district court granted Novartis’s motion for summary judgment on the ground that plaintiffs were outside salesmen and/or administrative employees.
(1) Were the reps “outside salesmen?”
(2) Were the reps “administrative employees?”
No. Case reversed.
(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.