Reps for Pharmaceutical Sales Can Claim Overtime: Supreme Court

Washington, DCMajor pharmaceutical companies have been facing a new enemy on the lawsuit front—and it has nothing to do with allegedly unsafe drugs. In this case, sales representatives engaged by the major drug companies to facilitate pharmaceutical sales, have been seeking the opinion of the courts on whether or not they qualify for overtime under the Fair Labor Standards Act (FLSA).

The pharmaceutical companies say no. Those who work in pharmaceutical sales jobs say yes. On February 28, the US Supreme Court agreed with the latter position.

The dispute centers on whether or not pharmaceutical sales reps fall under the classic description of a salesperson who sells a product on behalf of the engaging company, and earns a commission on those sales. True to that description, pharmaceutical reps earn commissions on sales.

However, reps claim that they should be compensated for working long hours, arguing that their efforts do not fall within the classic sales job paradigm due to the fact sales reps don't actually make a sale. That's because, the pharmaceutical sales rep argues, they call upon doctors. But while doctors prescribe drugs promoted by the sales rep to their patients, the doctors don't actually sell the drugs or buy them from the sales rep. Rather the drugs are sold by pharmacists and vended to patients who actually do the purchasing or an HMO.

According to the March 1 issue of the Boston Globe, two pharmaceutical giants had appealed an earlier federal court ruling that deemed the pharmaceutical rep as being covered by federal wage-and-hour laws. The Supreme Court, however, turned those appeals away, thereby refusing to insulate the drug industry from having to pay overtime.

This all comes on the heels of several lawsuits filed by employees working for Johnson & Johnson, Bristol-Myers Squibb and GlaxoSmithKline claiming unpaid overtime. Novartis, which is also facing pharmaceutical sales salary litigation, is facing claims of as much as $100 million from about 2,500 past and current employees.

Drug companies have long since interpreted the pharmaceutical representative as being exempt from overtime. Recently, however, a number of plaintiffs have been challenging that interpretation. An earlier decision by a trial judge in the Novartis case ruled that sales people were governed under exceptions to the FLSA for outside sales people and administrative workers and thus, exempt from overtime. However, the US Court of Appeals for the Second Circuit overturned that decision in a 3-0 vote.

Novartis and the other defendant having issue with the appellate court's decision, Merck, appealed to the Supreme Court and lost.

In commenting on the issue of pharmaceutical sales rep jobs qualifying for overtime pay, the advocacy group Pharmaceutical Research and Manufacturers of America argued that overtime pay for reps "threatens untold costs in unforeseen liability."