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Overtime Lawsuit at Bristol-Myers Will Infuriate Big Pharma Managers

A Bristol-Myers Squibb (BMY) pharmaceutical sales rep's overtime pay lawsuit will infuriate Big Pharma managers because it is so thin on facts it looks as if the plaintiff is simply chancing his arm. Now that four drug companies have lost rulings in cases where drug sales reps alleged they were denied overtime pay, every company will likely face one of these suits, no matter how flimsy or gratuitous the allegations, from current and former reps hoping for effort-free windfall verdicts or settlements.

The suit was filed by former BMS rep Jeffrey Bethune, of Washington, Ore., The entire sum of his factual allegations is that he did not receive time-and-a-half pay for weeks in which he worked more than 40 hours. That's it. There are no further details. Upon reading it, BMS managers are likely to fume, "What was it about the compensation structure Bethune didn't understand when he took the job?"

Drug sales is a generously compensated profession, with many reps receiving six-figure salaries and company cars. Bethune worked at BMS for less than two years, leaving in 2008. If the case goes the wrong way for BMS, thousands of reps could receive payouts.

Conflicting precedents
The law in this area is currently confused: Some courts have ruled that reps aren't actually salespeople because they don't technically make sales, and therefore they are the type of salaried managers who are not entitled to overtime. But other courts have ruled that reps' on-the-job discretion is so minor that they are the equivalent of protected hourly workers for which the law requires overtime pay.

It's likely that every company will eventually face a federal suit from reps demanding overtime pay. Litigants will be buoyed by a recent $7.7 million settlement at HealthFirst, a health plan that didn't pay its marketing reps OT. Those reps were employed to identify Medicaid-eligible individuals in the New York area and sign them up for free health insurance. The Kaiser Foundation Health Plan settled with some of its IT workers on the identical issue.

Both those settlements were small and feature staff who do similar (but not identical) work to drugs reps in similar (but not identical) healthcare companies. That signals that some managers see the writing on the wall (the U.S. Labor Department has also sided with the reps.) Others, however, will fight on until either the federal appeals courts or the U.S. Supreme Court makes a final decision.

Here's the updated OT legal scorecard:

  • Companies that have lost rulings favoring OT for reps: Novartis
    Abbott Labs
    Merck (Schering-Plough)
    Boehringer Ingelheim
  • Companies that have won rulings denying OT for reps:
    Pfizer (Alpharma)
    Johnson & Johnson (Ortho McNeil)
  • Settlements favoring OT for reps:
    Kaiser Foundation Health Plan
  • Pending cases:
    Pfizer (King), Takeda, Amgen, Serono, Bristol-Myers Squibb