"Novartis Reps Are Too Rich for Overtime Pay," Says Judge; Ruling Is Appealed

Last Updated Oct 19, 2009 10:40 AM EDT

Novartis' 2,500 sales reps should not be paid overtime because they are too rich and work independently like white-collar managers, according to a ruling that is being appealed by the Dept. of Labor. The DOL filed an amicus brief in the case earlier this month. The case is one of many in which pharma sales reps have argued that they are not really salespersons (who are exempt from certain labor laws) and should therefore be paid millions in back-pay for overtime.

Novartis won a ruling in federal district court in January. In other cases, Schering-Plough reps and Boehringer-Ingelheim reps both won rulings allowing their cases to be heard. There are similar cases at Amgen and Serono. Aside from Novartis, Ortho McNeil also won a ruling against its reps.

The legal filings in the case are complicated but the laws at stake are easy to understand. Employers must pay overtime to certain workers unless they are highly paid, independent managers, or outside salespersons. The definition of "sales" is 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; and (2) Who is customarily and regularly engaged away from the employer's place or places of business in performing such primary duty.
The reps argue that they do not actually sell drugs, merely promote them. Novartis argues that reps certainly are engaged in sales, and that their bonuses are dependent on making sales goals.

The ruling being appealed is worth a read. In it, the judge sided with Novartis in part because reps are so well-paid:

... between 15% and 25% of a Rep's average annual salary of $91,500 consists of incentive pay. Payments of between $13,725 and $22,875 are significant components of a Rep's annual salary. Additionally, NPC provides Reps with company cars and fuel costs to facilitate their physician visits. High-performing Reps are eligible for additional benefits such as all-expenses-paid vacations.
... Their average salary of $91,500 per year translates into a weekly salary of $1,760, which is nearly four times the statutory minimum of $455 per week. Moreover, they engage in work that is directly related to the management or general business operations of NPC and they exercise discretion and independent judgment with respect to matters of significance.
Plaintiffs have characterized themselves as mere "robots" or "automatons" who enjoy no room to act with discretion or independent judgment within the stringent confines of NPC's regulations. ... These labels are not facts, but merely arguments designed to avoid the overtime exemptions. They do not begin to answer why or how a robot or an automaton could or should earn an average salary of $91,500 per year.
The DOL disagrees. It argues:
The Reps do not sell or take orders for NPC's drugs; rather, they provide information to target physicians about NPC's drugs with the goal of persuading the physicians to prescribe those drugs to their patients. The actual sale of drugs takes place between NPC and pharmacies.
... although the Reps have some discretion (such as deciding what time of day to see which physician, tailoring their message to a physician's personality or time constraints, and deciding whether to ask for a non-binding commitment at the end of a visit), they do not exercise discretion and independent judgment with respect to matters of significance.
And finally: Novartis' managers know which of their employees has joined the class-action. The plaintiffs' names are all clearly visible on the federal court's docket sheet, which is open to the public.