Second Circuit: To Be Exempt from OT, Sales Representatives Must Actively Make Sales Not Promote Products
July 7, 2010
On July 7, 2010 the Second Circuit held drug sales representatives for Novartis Pharmaceuticals Corp. are not exempt from overtime. The Novartis representatives worked a 9-hour day making regular calls to doctors to inquire as to whether the doctors would prescribe Novartis drugs to their patients and to promote these drugs to the doctors – they did not “sell” the drugs to the doctors. The representatives received commissions/bonuses when a specified amount of drugs were sold within their sales territory.
Novartis claimed that the sales representatives were exempt from overtime under the outside sales and administrative exemptions. The district court agreed with Novartis, and granted summary judgment holding the sales representatives exempt as outside sales employees, or as administrative employees because the representatives exercise discretion and independent judgment.
The Second Circuit overturned the summary judgment decision, agreeing with the position advanced by the United States Department of Labor in their amicus brief that, because Novartis’ representatives do not make sales or obtain orders within the meaning of the FLSA’s regulations, they are not salespeople. It was not enough that the representatives promoted the drug and transferred free samples. The representatives could not obtain an order for the drug or even a binding commitment from the doctor that they would prescribe the drug. The Second Circuit also agreed with the DOL that the administrative exemption did not apply because the FLSA’s regulations require employees to exercise greater discretion and more independent judgment than what Novartis allowed of its sales representatives.
Following this decision, employers whose sales employees are considered exempt as outside salespeople should be certain that the employees are actively selling products or services – obtaining orders and receiving a binding commitment to purchase products or services – not just promoting a product or service, educating customers about a product or service, or providing free samples of no value.
In re Novartis Wage and Hour Litigation, No. 09-0437-cv, 2010 WL 2667337 (2d Cir. July 6, 2010).
Back to News.
NEW YORK
90 Park Avenue, 18th floor
New York, NY 10016
Main: 212-455-9255
Fax: 212-297-0005
SAN FRANCISCO
201 Spear Street, Suite 1100
San Francisco, CA 94105
Main: 415-230-5334
Fax: 212-297-0005