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Federal courts rule against overtime in pharmaceutical cases

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In a pair of decisions, the U.S. Supreme Court and the 7th Circuit Court of Appeals examined different exemption provisions to overtime requirements of the Fair Labor Standards Act but reached the same conclusion: Pharmaceutical sales representatives are not entitled to overtime pay.

The Supreme Court considered the outside salesman exemption in Christopher, et al. v. SmithKline Beecham Corp., 11-204, while the 7th Circuit reviewed the administrative exemption in Susan Schaefer-LaRose v. Eli Lilly & Co., 10-3855. Both courts sided with the employers, finding that although pharmaceutical “detailers,” as they are called in the drug-making industry, worked under heavy regulations and constraints, they did meet the overtime exemption requirements outlined in the FLSA.

guevara Guevara

Attorneys familiar with the two rulings point to broader implications that the cases hold, which could guide future decisions on wage-and-hour lawsuits as well as the behaviors of federal agencies.

In addition, the decisions come at a time when lawsuits filed under the FLSA are increasing. These types of cases have been growing: 1,961 cases were filed in the reporting year that ended March 2001, according to a report in Law360. The total hit 7,006 new cases filed during the reporting year that concluded March 2011 and rose again to 7,064 in the reporting year that finished March 31, 2012.

Eli Lilly & Co.

The 7th Circuit combined the Eli Lilly case with two others involving Illinois-based Abbott Laboratories. In these cases, the plaintiffs claimed they were misclassified as exempt and were due overtime pay. The defendants argued the employees were not entitled to overtime under both the administrative exemption and the outside sales exemption.

Since the Supreme Court was already looking at the outside sales provision, the 7th Circuit concentrated on the administrative exemption. Under this section of the FLSA, the administrative exemption applies to employees who do office or non-manual work directly related to the management or general operations of the company and who exercise discretion and independent judgment in matters of significance.

Ellen Boshkoff, partner at Faegre Baker Daniels LLP, was the lead counsel for Lilly. James O’Brien III, counsel at Seeger Weiss, was the lead counsel for Susan Schaefer-LaRose.

The plaintiff in the case had worked for Lilly from 1988 to 2006 and was frustrated by the long hours that often necessitated working on weekends and holidays, O’Brien said. She had to travel a great deal and was required to be in the field calling on physicians from 8 a.m. to 5 p.m. which meant she had to use her evening hours to complete the paperwork.

Seeger Weiss sent letters to 777 former and current sales representatives at Lilly, and 388 joined the Schaefer-LaRose case.

These plaintiffs maintained they did not meet the standard for exercising discretion and independent judgment because they had to perform their jobs according to precise regulations set forth by the U.S. Food and Drug Administration and by their employer.

In its opinion, the 7th Circuit reserved the District Court’s ruling in Abbott and upheld the ruling of the Southern District of Indiana in the Lilly case. The 7th Circuit found that although the sales personnel must deliver the pharmaceutical companies’ messages with precision, they are not “simple mouthpieces, reciting scripts.” They are given extensive education and training, work under minimal supervision, and must tailor their messages to respond to the circumstances.

The 7th Circuit’s ruling marks the ninth consecutive decision, stretching over 63 years, in which the court found the employee at issue was not entitled to overtime under the administrative exemption, according to O’Brien. Not since its 1949 opinion in McComb v. Robert W. Hunt Co., 172 F.2d 751 (7th Cir. 1949), has the court held that an employee did not perform administratively exempt work, he said.

Boshkoff believes the ruling from the 7th Circuit, as well as from the Supreme Court, will provide guidance not just in cases involving pharmaceutical sales representatives but for anyone seeking clarification of the administrative exemption. It is an important case, she said, that people will use when applying the administrative exemption to employees in such positions as human resources, marketing, accounting and procurement.

SmithKline Beecham Corp.

Focusing on the outside sales exemption, the Supreme Court rejected the plaintiffs’ argument that their job duties do not meet the standard of selling. Pharmaceuticals detailers are barred from directly selling drugs by federal law, so they solicit nonbinding commitments from physicians to prescribe the product.

boshkoff Boshkoff

The court held that what the detailers were doing did meet FLSA’s broad definition of “outside salesman” which allows a “nonbinding commitment” to qualify as a sale. They were functioning as sales representatives, even though they were not actually selling pharmaceuticals, in part because they received a commission based on the number of prescriptions written.

A key element to the ruling is the Supreme Court’s decision not to give deference to the U.S. Department of Labor’s interpretation of the outside salesman exemption. The court faulted the agency for changing its reasoning over what constitutes a sale in the briefs it filed with the lower courts and held the interpretation “lacks the hallmarks of thorough consideration.” In addition, it noted that the department first announced its position in a series of amicus briefs which did not provide the opportunity for public comment.

Greg Guevara, partner in the labor and employment group at Bose McKinney & Evans LLP, sees this decision as reminding the labor department to make regulations through the established due process instead of in the courts.

“The broader implications are that the Supreme Court essentially said to the Department of Labor that if they want to take a position regarding the Fair Labor Standards Act, they need to do this through the formalized rulemaking process rather than through litigation,” Guevara said. “I think the potential ramification is if there is going to be a change in the way that the white collar exemptions are interpreted, it is more likely the Department of Labor is going to pursue the change through the rulemaking process.”

The federal agency filed briefs on behalf of the plaintiffs in the cases, but the 7th Circuit did not consider the department’s amicus brief because it determined the regulations regarding the administrative exemption were unambiguous.

On the other hand, the Supreme Court noted that while deference is usually given to an agency’s interpretation of its own “ambiguous regulation,” giving deference in the SmithKline Beecham case to the department’s interpretation of the outside sales exemption would bring an “‘unfair surprise’ against which this Court has long warned.”

The court highlighted that the pharmaceutical industry has treated its detailers as exempt outside salesmen for decades and the Department of Labor never brought any enforcement action. In turn, the “only plausible explanation” for the department’s inaction is that it accepted the practice. •
 

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  1. Am I the only one who sees that the City is essentially giving away the MSA site AND giving millions to build new buildings on the site when this site would be the perfect place for the Justice Complex? Across from City-County, check; keeping it centrally located, check, etc. It's my understanding that the GM site must be purchased by the City from Motors Liquidation Company. STOP WASTING WHAT WE ALREADY HAVE AND OUR TAX DOLLARS! The Ballard Administration has not been known for it's common sense...never voted for him and never will!

  2. This guy sounds like the classic molester/manipulator.

  3. Louis D. Brandeis was born in 1856. At 9 years of age it would have been 1865. The Brandeis family did not own slaves. My source Louis D. Brandeis: A Life, by Melvin L. Urofsky.

  4. My name is Matthew Lucas Major, I recently went through a jury trial in Bloomington , In. It was the week of Feb 19-21. Although I have been incarcerated since August 5, 2014. The reason I 'am writing to you sir is on the 21 of February the jury came in with a very excessive and wrongful verdict of guilty on 6 child molesting charges against my daughter who was 9 at the time I was accused. I also had 2 other Felonies one of Intimidation and 1 of Sexual Vicarious Gratification. Judge Marc Kellam on the second day of trial gave me a not guilty on those 2 felonies. The jury was sent out during that time and when brought back Judge Kellam told them to not concern themselves with the 2 Felonies that he ruled on them. They were told to not let evidence they had already heard influence there verdicts. I never in my life touched any child sexually and definitely not with my own daughter. When I was arrested Detective Shawn Karr told me I would be convicted guilty just on my daughters word even without evidence. That's just what happened. my public defender did me so wrong he never once proved to the court and jury all the lies the child told, and Jeremy Noel my public defender could of proven the lies easily. The stories in Serenity's depositions and Forensic interview changed and were not consistent as Prosecutor Darcie Fawcett claimed they were. Yet my attorney never mentioned that. The facts that the child accused me of full penetration in her vagina and rectum was proven lies. Doctor Roberta Hibbard of Riley hospital in Indianapolis confirmed Serenity's hymen intact, no scars, no tearing, no signs of rape to her. Yet my attorney didn't use that knowledge . the DNA was all in my favor. I tell you I will spend my entire life in prison going through rape and beatings etc. even Judge Kellam abused his authority by telling the jurors to listen and believe what the prosecutors side in evidence like my daughters testimony. In one interview with the detectives my daughter got flustered with her mom and said on camera " I'm saying what you told me to mom"!! Yet Mr. Noel said nor did anything to even resemble a defense attorney. Judge Kellam allowed edited version of a taped conversation between the child and her mother. Also Judge Kellam allowed the Prosecutor too bring in to my case a knife found under my seat, the knife wasn't part of my case. She was allowed by my attorney and the judge to put a huge picture of it on the screen and huge picture of my naked privates in a full courtroom and open court. Ms. Fawcett says to jury see how easy Mr. Major could reach the knife and cut his Childs throat. Even though I had no weapons charge against these cases. This gave the jurors prejudice thought against me thinking I threatened her with that knife and how scared she would of been knowing i could get it and kill her. On my sentencing court March 19, 2014 my public defender told Judge Kellam he wish to resign from being my attorney and wished for the court to give me outside council to file a error to trial or appeal. We were denied. Now after openly knowing my public defender don't want to represent me he has to. Well when as parents we make our kids clean a room when they really don't wish to, well the child will but don't mean she will do a good job, that's where I'm at with Mr. Noel. please dont ignore mine and my families pleas for your help . we have all the legal proof you could need to prove Im innocent. Please dont make my spend years in prison innocent when you can fix this wrong. Im not saying Im a perfect man or that I was a perfect dad to my 2 children none of us are. Ive made some bad choices in life and I paid for them. But I didnt ever touch or rape my daughter . I love my children with all my heart. And now through needing attention and a ex-wife who told my granny several times she wish she could put me in prison to get me out of their lives. Well my ex finally accomplished her goal. Sad part is she is destroying our daughter with all this horrific lies and things she taught my daughter to say. My daughter will need therapist to ever hope for a chance of a normal life after what she had done to her by her mom and their side of the family. My daughter told everyone even on stand she had a dream months before i supposedly molested her in this dream I was molesting her and when I finally did it matched her dream perfectly. She admitted to watching movies about little girls being molested and watching U-Tube videos about child molesting all before it happened supposedly to her. Doesn't that sound very unusual that a non molested 9 yr old would need to know so much about being molested? The only reason I could think a 9 year old would need so much information is to be prepared to know what to say and be able to say how it felt what took place etc.. So when questioned by authorities she would be prepared. And there again sir if a parent is pre grooming a 9 year old child she would need intimate details . Like telling her daughter about a couple moles on my private area. The child admitted to sneaking my cell and looking many many times at nudes of me and my girlfriend even one where my penis was entering my girlfriends vagina. In that picture my moles are obvious. Yet when prosecutor showed everyone in court my privates and pictures of the moles she said the only way the child would know about them is if she saw them for herself. My attorney once again said nothing about the pictures my child saw. Or could a ex-wife be able to describe my moles to help her case against getting rid of me? I beg you help me. This is my very existence. Ive lost everything , a good job, a wonderful girlfriend, my freedom, but worse thing Ive lost is my children. They were my reason to get up every morning and strive to be better. The wonderful bond I had with my Serenity is gone. After this I would be afraid to even hug her for fear of what next can they do to me. I'm not afraid to tell you I sit here in this cell and try to hold back my tears. Everyone knows you cant show weakness in prison. My life has already been threatened here at Wabash Valley Prison. After only 3 days of arrival. I was tricked into signing a waiver now Im in G Block General Population with 6 child molesting felony charges. Mrs. Hart as a 18 year old I almost died hooked to machines in hospital almost 1 month and now I know that fear was childish compared to this . I cant help but put emotions in this, after all Mrs. Hart Im human and God help Me I never been more afraid in my life. I didnt hurt my little girl I didnt touch her sexually. As much as it shreds me and fills my mind what Im facing I worry more about my mom and granny because of their great love for me mam they are suffering so deeply. I aint done this things but my loved ones suffering right along beside me and If you take my case you will be in essence freeing them also. I sent momma this letter and asked her to email it to you. I'm scared I have been done so unjustly by our legal system and I need you to fix this and give me freedom. I ask you please don't just ignore my pleas. Here in America its nice to be able to trust our legal justice system, well they destroyed my and my loved ones trust in our justice system . And I'm trusting in You !!! My entire family is suffering this nightmare with me. My 77 year old granny had a stroke and isn't doing so well. My single mother that raised 3 kids alone is dying from Lupus and since my arrest has stayed so sick and weary. Our lives torn to peices by a government I was taught I could trust in. my momma has tried so many innocent project and wrongfully accused and cant get anywhere. please please help me. A quote from the late Nelson Mandela: To be free is not merely to cast off ones chains, But to live in a way that respects and enhances The Freedom Of Others. I have Faith in you and your clinic to cast my chains off and give me freedom I do deserve as a wrongfully accused Man, son, brother, father, friend. Matthew Major DOC# 246179 Cause # : 53c02-1308-FA-000779 God Bless you. Please contact me with your decision so I know you made a life changing decision for me , just please at least write me so I know you care enough about your citizens to respond to cries for your help. You can speak openly with my mother Charlotte Spain (828) 476-0406: 71 Lakeview Dr. Canton, NC 28716 Thank You Matthew Major I know yall get thousands of request and inmates claiming innocence, and each person who are innocent deserve to have organizations like yours willing to fight for them and I give yall so much Thanks and I thank God everyday yall are out there caring enough to help free the innocents. Since discovering firsthand how easily lives and families can be destroyed by Poor Defense attorneys not doing their job . And Prosecutors allowed to do as they please in court

  5. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

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