7th Circuit Holds Pharma Sales Reps Not Entitled to Overtime

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On Tuesday, the U.S. Court of Appeals for the 7^th Circuit ruled that pharmaceutical companies do not owe overtime pay to sales representatives. The decision can save billions of dollars for industry employers and lead to similar losses for sales representatives. In the case brought against Eli Lilly & Co and Abbott Laboratories, the court held that sales representatives have the same status as administrative employees and are therefore not entitled to overtime requirements under the Fair Labor Standards Act.

The FLSA requires companies to pay for work done beyond forty hours a week, but does not include administrative employees and outside sales personnel. If the decision remains unchallenged or upheld during challenge then all sales representatives can be characterized as administrative employees and denied overtime. According to the law, administrative employees are expected to do work related to central business operations and have to exercise their own discretion.

The employees contended that the exemption in the case of administrative employees was intended to include only higher-level employees who exercise more discretion than simple sales representatives who only follow company directives and promote company products to doctors. However, the 7^th circuit disagreed.

  

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The court held that “The representatives before us are the public face of their employer to the most important decision-maker regarding the use of their companies’ products, the prescribing physicians.”

The court found that sales representatives are not simply reciting company provided scripts but their work is administrative in nature.

The Department of Labor has filed amicus briefs in favor of the employees and hold that pharmaceutical sales representatives are neither ‘outside sales’ personnel nor ‘administrative employees.’ The new decision contradicts an earlier decision of the 2^nd Circuit which holds that the nature of work carried out by sales employees does not attract the exemptions of ‘administrative employees’ or of ‘outside sales.’

The cases before the 7th Circuit are Schaefer-LaRose v. Eli Lilly & Company, No. 10-3855; Jirak v. Abbott Laboratories Inc, Nos. 11-1980, 11-2131.