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7th Circuit rules Lilly sales reps not entitled to overtime

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Pharmaceutical sales representatives from Eli Lilly & Co. and Abbott Laboratories were properly classified by their employers under the administrative exemption to the overtime requirements of the Fair Labor Standards Act, the 7th Circuit Court of Appeals ruled. The lawsuit brought by employees of both companies raised an issue of first impression for the Circuit court.

The 7th Circuit combined the Indiana case, Susan Schaefer-LaRose v. Eli Lilly & Co., No. 10-3855, with two from Illinois involving Abbott Laboratories Inc., in which current and former sales employees sued, claiming that they were misclassified as exempt employees and denied overtime pay in violation of the FLSA. Lilly and Abbott argued that the administrative exemption and the outside sales exemption, 29 U.S.C. Section 213(a)(1), remove the sales reps from the overtime protections of the FLSA.

U.S. Judge Sarah Evans Barker in the Southern District of Indiana ruled in favor of Lilly; the Illinois cases favored the plaintiffs. The Department of Labor filed an amicus curiae brief in the Indiana case, requesting the court find the plaintiffs are not administrative employees nor outside sales persons under the statute and the DOL’s regulations.

The 7th Circuit focused on just the administrative exemption, noting that the outside sales person exemption issue is before the U.S. Supreme Court from the 9th Circuit Court of Appeals. The plaintiffs believe that they don’t fall within the exemptions because they don’t actually sell the drugs to the physicians, but merely engage in promotional work that results in sales by third parties.

The judges relied on their caselaw, including Haywood v. North American Vans Lines Inc., 121 F.3d 1066 (7th Cir. 1997), and a decision from the 1st Circuit Court of Appeals to find the work done by pharmaceutical sales reps is characterized properly as administrative.

“ … the sales representatives’ primary duty is the performance of work directly related to the general business operations of the employers, which satisfies the second prong of the administrative exemption,” wrote Judge Kenneth Ripple.

The issue of whether pharmaceutical sales employees’ primary duty includes “the exercise of discretion and independent judgment with respect to matters of significance” is one of first impression for the 7th Circuit. But other Circuits have considered this issue with regard to pharmaceutical sales reps, and the judges focused on the 2nd Circuit’s decision in In re Novartis Wage & Hour Litigation, 611 F.3d 141 (2nd. Cir. 2010), and the 3rd Circuit’s Smith v. Johnson & Johnson, 593 F.3d 280 (3d Cir. 2010), which are conflicting decisions.

The 7th Circuit concluded that the sales reps were required to exercise a significant measure of discretion and independent judgment, despite the constraints instituted by the regulatory environment of the pharmaceutical industry. Although they must deliver specific messages to the doctors, the sales reps must tailor their messages to respond to the circumstances, noted Ripple.

“The particular discretion exercised by the representatives before us is within the range of cases in which the exemption has been applied,” he wrote.

The 7th Circuit affirmed the decision by Barker in the Lilly case and ordered the Illinois court to enter judgment in favor of Abbott.


 

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  1. All the lawyers involved in this don't add up to a hill of beans; mostly yes-men punching their tickets for future advancement. REMF types. Window dressing. Who in this mess was a real hero? the whistleblower that let the public know about the torture, whom the US sent to Jail. John Kyriakou. http://www.nytimes.com/2013/01/26/us/ex-officer-for-cia-is-sentenced-in-leak-case.html?_r=0 Now, considering that Torture is Illegal, considering that during Vietnam a soldier was court-martialed and imprisoned for waterboarding, why has the whistleblower gone to jail but none of the torturers have been held to account? It's amazing that Uncle Sam's sunk lower than Vietnam. But that's where we're at. An even more unjust and pointless war conducted in an even more bogus manner. this from npr: "On Jan. 21, 1968, The Washington Post ran a front-page photo of a U.S. soldier supervising the waterboarding of a captured North Vietnamese soldier. The caption said the technique induced "a flooding sense of suffocation and drowning, meant to make him talk." The picture led to an Army investigation and, two months later, the court martial of the soldier." Today, the US itself has become lawless.

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