High Court Lets Stand Ruling that Novartis Reps Are Due OT

February 28, 2010 (PLANSPONSOR.com) – The U.S. Supreme Court has denied review of cases in which pharmaceutical sales representatives claimed they are due overtime pay.

A client alert from attorneys Seyfarth Shaw LLP says the high court announced its decision to deny certiorari in Novartis Pharmaceuticals Corp. v. Lopes et al as well as in Kuzinski v. Schering Corp., 384 Fed. Appx. 17 (2d Cir. 2010), in which the 2nd U.S. Circuit Court of Appeals relied on Novartis and affirmed a district court decision determining that pharmaceutical sales representatives for Schering Corporation are not exempt under the outside sales exemption.   

The 2nd Circuit ruled that pharmaceutical sales representatives for Novartis Pharmaceuticals Corporation do not meet the criteria for either the administrative or outside sales exemptions of the Fair Labor Standards Act (FLSA) and are, thus, entitled to overtime pay for work in excess of 40 hours in a week (see Novartis Reps’ Overtime Claims Reinstated). According to Seyfarth Shaw, giving controlling deference to an amicus curiae brief filed by the Department of Labor on behalf of the plaintiffs, the 2nd Circuit held that because pharmaceutical sales representatives are prohibited under federal law from actually entering into contracts to sell their employer’s prescription drug products, they do not qualify for the outside sales exemption, despite long-standing DoL acquiescence in the consistent practice in this highly regulated industry of treating these sales representatives as exempt.   

The court also held that the highly regulated nature of the pharmaceutical industry prevented these employees from exercising “sufficient” independent judgment and discretion to qualify for the administrative exemption.   

The law firm said the petition by Novartis to the Supreme Court sought review of the following questions: (1) whether the 2nd Circuit’s holding that highly-paid pharmaceutical sales representatives are not covered by the FLSA’s administrative exemption or the outside sales exemption, is contrary to the statute’s text, purpose, and the DoL’s long-standing regulations; and  (2) whether an agency’s break with prior interpretations of its regulations, advanced for the first time in an amicus brief, is entitled to heightened deference under prior Supreme Court precedent.   

Seyfarth Shaw noted that this case would have marked the first time that the Supreme Court squarely addressed the “duties test” requirements of any of the FLSA’s white collar exemptions in the seventy year history of the statute.