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Boehringer Must Pay Overtime To Sales Rep: Judge
By Ed Silverman // July 14th, 2011 // 7:50 am
overtime-hellIn yet another victory for sales reps, a federal judge ruled that a Boehringer-Ingelheim rep is not exempt from overtime provisions of the Fair Labor Standards Act and should be paid overtime. The ruling, which came in the form of a summary judgment and is now headed to trial to determine damages, is the latest in a highly contentious decision that has divided courts across the country
For the past few years, a growing number of sales reps have argued they were unfairly denied overtime and nearly every drugmaker has been taken to court (look here and here). The US Department of Labor, however, has sided with the reps, arguing that many of the biggest drugmakers have misinterpreted the Fair Labor Standards Act.
Here is the issue: the FLSA overtime compensation requirement does not apply to employees who work as outside salespeople, but the law does require employers to pay overtime for hours worked beyond 40 hours a week, unless an exemption applies. What are those exemptions? If an employee’s primary duty is to obtain orders or contracts (as defined by the statute) and regularly does so away from the employer’s place of business.
Drugmakers argue their sales reps are, indeed, outside salespeople who close sales because the primary customer is the physician. However, sales reps have maintained that a direct sale doesn’t occur because medicines are actually purchased by patients and hospitals, which receive the drugs from wholesalers. In this latest case, former Boehringer rep Graciela Palacios succeeded in convincing a federal court judge in Florida that she is not exempt for these reasons.
Drugmakers have won select battles and there was one notable example earlier this year, when the US Court of Appeals for the Ninth Circuit ruled in favor of GlaxoSmithKline, prompting the Labor Department to seek a rehearing before the entire appeals court (read here) and speculation the US Supreme Court may eventually review the issue.
Last February, though, the US Supreme Court decided not to review a pair of cases in which a lower court decided that Novartis and Schering-Plough should have paid overtime to its sales teams. The move means that still other lawsuits filed against several other drugmakers are likely to yield the same outcome, possibly prompting changes in the way sales reps are compensated (back story).
By the way, the federal judge in the Palacios case ruled that the administrative exemption also did not apply. This exemption relieves employers from paying overtime wages to any employee employed in a bona fide executive, administrative, or professional capacity - and to employees earning over $455 a week whose primary duty is to perform office or non-manual work involving managerial or general business matters. A primary duty includes exercising discretion and independent judgment. But Boehringer failed to convince the judge that its former rep held such a position (here is the order).
Boehringer Must Pay Overtime To Sales Rep: Judge
By Ed Silverman // July 14th, 2011 // 7:50 am
overtime-hellIn yet another victory for sales reps, a federal judge ruled that a Boehringer-Ingelheim rep is not exempt from overtime provisions of the Fair Labor Standards Act and should be paid overtime. The ruling, which came in the form of a summary judgment and is now headed to trial to determine damages, is the latest in a highly contentious decision that has divided courts across the country
For the past few years, a growing number of sales reps have argued they were unfairly denied overtime and nearly every drugmaker has been taken to court (look here and here). The US Department of Labor, however, has sided with the reps, arguing that many of the biggest drugmakers have misinterpreted the Fair Labor Standards Act.
Here is the issue: the FLSA overtime compensation requirement does not apply to employees who work as outside salespeople, but the law does require employers to pay overtime for hours worked beyond 40 hours a week, unless an exemption applies. What are those exemptions? If an employee’s primary duty is to obtain orders or contracts (as defined by the statute) and regularly does so away from the employer’s place of business.
Drugmakers argue their sales reps are, indeed, outside salespeople who close sales because the primary customer is the physician. However, sales reps have maintained that a direct sale doesn’t occur because medicines are actually purchased by patients and hospitals, which receive the drugs from wholesalers. In this latest case, former Boehringer rep Graciela Palacios succeeded in convincing a federal court judge in Florida that she is not exempt for these reasons.
Drugmakers have won select battles and there was one notable example earlier this year, when the US Court of Appeals for the Ninth Circuit ruled in favor of GlaxoSmithKline, prompting the Labor Department to seek a rehearing before the entire appeals court (read here) and speculation the US Supreme Court may eventually review the issue.
Last February, though, the US Supreme Court decided not to review a pair of cases in which a lower court decided that Novartis and Schering-Plough should have paid overtime to its sales teams. The move means that still other lawsuits filed against several other drugmakers are likely to yield the same outcome, possibly prompting changes in the way sales reps are compensated (back story).
By the way, the federal judge in the Palacios case ruled that the administrative exemption also did not apply. This exemption relieves employers from paying overtime wages to any employee employed in a bona fide executive, administrative, or professional capacity - and to employees earning over $455 a week whose primary duty is to perform office or non-manual work involving managerial or general business matters. A primary duty includes exercising discretion and independent judgment. But Boehringer failed to convince the judge that its former rep held such a position (here is the order).