Second Circuit Rules: Sales Reps for Drug Companies Not Exempt from FLSA Protection

2nd Circ. Finds Drug Reps Not Exempt From FLSA

This July 6th article from Law360 discusses a Federal appeals case that focuses on whether the Fair Labors Standards Act (FLSA) provides protection for pharmaceutical sales representatives. The Second Circuit ruled in two critical cases -- one involving pharmaceutical giant, Novartis, and one involving the Schering-Plough Corporation -- that the US Department of Labor was correct in claiming that drug sales reps should be covered by the FLSA.

Lower courts had ruled differently in the two cases. In the Novartis case - a class action suit - the lower court ruled in favor of the Swiss drug maker, Novartis. In the Schering case - in which attorneys from Joseph & Kirschenbaum LLP represented the claimants, incidentally -- the plaintiffs won and Merck Inc. (the owner of Schering-Plough) had appealed.

At issue was the extent of discretion and independence sales reps could exercise. Novartis insisted that the reps were relatively independent operators, since they can choose how to allocate their budgets for promotion and decide when to go to physicians' offices to make sales calls. But the court did not buy this. In its decision, the court noted that "we agree with the Secretary that the four freedoms advanced by Novartis do not show that the Reps are sufficiently allowed to exercise either discretion or independent judgment in the performance of their primary duties." For instance, the reps could not participate in planning company marketing strategies, nor could they answer questions that the company had not scripted. In addition, they had to adhere to a "core message" when speaking with physicians.

Michael DiChiara (of Joseph & Kirschenbaum) mentioned in the article that the drug makers could try to appeal to the Supreme Court, since the lower courts had disagreed with each other. However, the drug makers may have a hard road to hoe; since, according to DiChiara, "the Third Circuit ruling [the Novartis case] is narrower and more fact based." Thus, DiChiara doubts that the Supreme Court will "say it's a complete split."