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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. From his recent appearance on WRTV to this story here, Frank is everywhere. Couldn't happen to a nicer guy, although he should stop using Eric Schnauffer for his 7th Circuit briefs. They're not THAT hard.

  2. They learn our language prior to coming here. My grandparents who came over on the boat, had to learn English and become familiarize with Americas customs and culture. They are in our land now, speak ENGLISH!!

  3. @ Rebecca D Fell, I am very sorry for your loss. I think it gives the family solace and a bit of closure to go to a road side memorial. Those that oppose them probably did not experience the loss of a child or a loved one.

  4. If it were your child that died maybe you'd be more understanding. Most of us don't have graves to visit. My son was killed on a state road and I will be putting up a memorial where he died. It gives us a sense of peace to be at the location he took his last breath. Some people should be more understanding of that.

  5. Can we please take notice of the connection between the declining state of families across the United States and the RISE OF CPS INVOLVEMENT??? They call themselves "advocates" for "children's rights", however, statistics show those children whom are taken from, even NEGLIGENT homes are LESS likely to become successful, independent adults!!! Not to mention the undeniable lack of respect and lack of responsibility of the children being raised today vs the way we were raised 20 years ago, when families still existed. I was born in 1981 and I didn't even ever hear the term "CPS", in fact, I didn't even know they existed until about ten years ago... Now our children have disagreements between friends and they actually THREATEN EACH OTHER WITH, "I'll call CPS" or "I'll have [my parent] (usually singular) call CPS"!!!! And the truth is, no parent is perfect and we all have flaws and make mistakes, but it is RIGHTFULLY OURS - BY THE CONSTITUTION OF THIS GREAT NATION - to be imperfect. Let's take a good look at what kind of parenting those that are stealing our children are doing, what kind of adults are they producing? WHAT ACTUALLY HAPPENS TO THE CHILDREN THAT HAVE BEEN RIPPED FROM THEIR FAMILY AND THAT CHILD'S SUCCESS - or otherwise - AS AN ADULT.....

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