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Pharmaceutical Sales Rep Overtime FAQ

What do pharmaceutical sales representative overtime lawsuits allege?

Lawsuits have been filed against various pharmaceutical companies alleging that pharmaceutical sales representatives were misclassified as exempt from overtime and should have been paid the regular overtime rate for overtime hours worked.

What does the Fair Labor Standards Act (FLSA) say about pharmaceutical representative overtime?

The Fair Labor Standards Act (FLSA) says that workers are eligible for overtime pay—that is pay that is one-and-one-half times their regular rate of pay—for overtime hours worked unless they fall under specific exemptions. The exemptions that have been applied to pharmaceutical sales representatives are the administrative exemption and the outside sales exemption.

What is the administrative exemption?

The administrative exemption means that workers who exercise a great deal of independent authority, judgement or discretion in their work can be considered administrative and are therefore exempt from overtime pay. In the case of pharmaceutical sales representatives, such discretion over how their job is handled can include decisions such as determining how to work in a specific area, which order to visit physicians and how best to promote various drugs or medical devices to doctors.

Why do pharmaceutical sales representatives say they do not fall under the administrative exemption?

Some lawsuits allege that although they work out of the office, pharmaceutical sales representatives have very little discretion and independent judgement in their work activities. Pharma sales reps allege that they must follow specific scripts when promoting products and that their activities are closely monitored by their employers, including determining how long they should speak with each doctor and how long they can take for breaks during their workday.

What is the outside sales exemption?

The outside sales exemption assumes that outside sales people earn a commission, which makes their earning potential virtually unlimited—and eliminates the need for overtime pay. Furthermore, outside sales representatives often set their own hours and the more hours they work, the more money they can make through those commissions.

To be exempt from outside sales, however, the employee must spend at least 50 percent of his or her time involved in sales.

Why do pharmaceutical sales representatives say they do not meet the outside sales representative exemption?

According to lawsuits, pharmaceutical sales representatives say they are not directly involved in the sales transaction. That is, when they visit doctors, they promote the benefits of a product, but they do not actually make a sale. The most they can do is obtain a commitment from a doctor that she will use or prescribe that specific product. In the end, however, the actual sale of a medication is up to the doctor to determine whether or not to prescribe it and then up to the patient to determine whether or not to fill the prescription. Therefore, the pharmaceutical sales representatives say they are not actually outside sales people because they are not directly involved in the sales transaction.

What does the Department of Labor say about pharmaceutical representative overtime?

The Department of Labor has sent briefs to the courts supporting pharmaceutical sales representatives in their fight to be paid overtime wages.

What have the courts found regarding pharmaceutical representative overtime?

The courts have been split regarding pharmaceutical representative overtime. Recently, a lawsuit filed against Novartis resulted in the courts finding for the pharmaceutical sales representatives, with the court noting that the sales reps do not fall under either the administrative or the outside sales exemptions and should therefore be paid for overtime hours worked.

On the other hand, a recent ruling in GlaxoSmithKline's lawsuit found that pharmaceutical sales representatives are involved in what are considered "sales" in the pharmaceutical industry and can therefore be considered outside sales representatives. Furthermore, the court found that the reps were given incentives for their performance, which greatly added to their income—similar to commissions.

What is next in pharmaceutical representative overtime lawsuits?

Because of the differing court opinions on pharmaceutical representative overtime, it is possible that either of the losing parties could request to have their case heard by the Supreme Court. It is not guaranteed, however, that the Supreme Court will hear the case, meaning that it could be up to the individual courts to determine whether or not pharmaceutical sales representatives are eligible for overtime pay.

Which companies face lawsuits regarding pharmaceutical rep overtime?

Among the companies that currently face lawsuits or could possibly face appeals of court decisions are Novartis, Merck and GlaxoSmithKline.
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Last updated on Mar-2-11

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