Recently, the U.S. Supreme Court declined to review a decision concerning outside pharmaceutical sales and the Fair Labor Standards Act (“FLSA”). The case, called In re Novartis Wage and Hour Litigation was decided by the Second Circuit Court of Appeals in 2010.

             The FLSA provides employees performing many kinds of work must be paid one-and- one-half times their regular rate of compensation for time worked over 40 hours a week. Certain workers, however, are excluded from this requirement. Two excluded occupations are outside sales representatives and administrative employees. However, having a job with either of these labels does not mean an employee is exempt, because whether the FLSA requires overtime depends on job duties and salary, not job labels.

             In Novartis, pharmaceutical sales representatives sought overtime under the FLSA. Their employer, Novartis Pharmaceutical, treated them as exempt based on the sales representative and administrative employee exemptions. The Court disagreed, finding their jobs did not meet either classification, thus they were entitled to overtime.

             Briefly put, under the FLSA, an outside sales representative whose primary duty is making sales or obtaining orders, who is regularly away from the employer’s place of business in performing his primary duties, is exempt from overtime. However, the Court said, while Novartis sales representatives visit physician offices, provide physicians with information about Novartis pharmaceuticals, and encourage physicians to prescribe the drugs, they do not actually sell products to physicians. Rather, the drugs are sold to wholesalers, who sell them to pharmacies, who sell them to the physicians’ patients, if the physician writes a prescription.

             While the Novartis sales representatives promote the product, the Court said, a person who merely promotes a product that will be sold by another person does not make the sale.  Since no sale is involved between the sales representative and the physician, who is the only person with whom the sales representative has contact, the Court ruled the FLSA requires the pharmaceutical sales representatives to be paid overtime.

             Next week we’ll discuss the exemption for administrative employees.