Client Alert

As previously addressed in our March 2008 FLSA client alert, pharmaceutical companies have been under scrutiny by courts across the nation as to whether any Fair Labor Standards Act exemption applies to its pharmaceutical representatives or whether they are entitled to overtime pay. A recent court opinion continues the trend of pharmaceutical companies winning the battle of exemptions although for a different reason. In a series of cases beginning in October, 2007, the U.S. District Court for the Central District of California entered summary judgment in favor of Wyeth, Bayer, and Roche when their respective pharmaceutical representatives filed suit against the companies alleging FLSA violations.¹ Feeling that they did not participate in the actual "sale" of the products they promoted, representatives argued they did not fall within the FLSA's "outside sales employee" exception, and thus were entitled to increased overtime wages. Rejecting the argument in all three cases, the court held that pharmaceutical representatives do participate in “sales” as defined by the FLSA and are thereby not entitled to overtime wage rates.

Despite these decisions, the U.S. District Court for the Southern District of New York recently reached a different conclusion in Amendola v. Bristol-Myers Squibb Co., ___ F. Supp.2d ___, 2008 WL 2309165 (S.D.N.Y. June 4, 2008). Like the plaintiffs in the California cases, Ms. Amendola was employed as a pharmaceutical rep, and her job duties, like the others for different companies, focused on the promotion of Bristol-Myers Squibb ("BMS") products to medical providers through presentations tailored to the providers based information provided by BMS. Ms. Amendola filed suit individually and on behalf of other similarly situated employees, alleging that the company failed to pay overtime wages. When addressing the issue of whether the "outside salespersons" exemption applied to pharmaceutical representatives, the court ruled that the drug reps’ work to influence physicians to prescribe certain drugs does not constitute "selling" under the FLSA. Since federal law prohibits such representatives from selling pharmaceutical products and since "almost every case where the [outside salesperson] exemption has been upheld, the employee either sold goods or services or took purchase orders," the court reasoned that the outside salesperson exemption did not apply to Ms. Amendola.

For a brief moment, counsel for drug reps may have been elated, until they continued reading the Amendola opinion. The court refused to permit Ms. Amendola to notify potential class members, finding that Ms. Amendola was not likely to succeed in her FLSA claims given the likely applicability of the "administrative" employee exemption to the FLSA. According to the court, since the plaintiff, a pharmaceutical representative, had the "discretion to set her schedule and tailor communications to a client's individual needs," she likely fell under the administrative exemption.

Fast forward a few weeks, and counsel is sure to be further confused! In a similar wage-and-hour lawsuit brought by drug reps against Pfizer, Inc., the Southern District of New York refused to dismiss claims against Pfizer who argued that the outside sales exemption clearly applied to the plaintiffs, but also refused to strike Pfizer's defense that the outside sales exemption was applicable to the drug reps. This recent decision occurred in Coultrip et al. v. Pfizer, Inc., case number 06-9952 in the United States District Court for the Southern District of New York, which is now scheduled for a hearing on the merits of a certification motion on this July 30.

Conclusion
We predict a busy 2008 for pharmaceutical companies as FLSA cases continue to reach various conclusions on the applicability of exemptions from the overtime requirements of the FLSA. Thus far, pharmaceutical companies have appeared to be the winner of the battle of the FLSA exemptions, but the war is not over. These cases will continue to progress and the battle of FLSA exemptions as applicable to pharmaceutical companies' drug representatives will continue to heat up providing counsel with numerous opinions and decisions to review, distinguish and track in the coming months.

If you have any questions regarding this client alert, please contact the Womble Carlyle attorney with whom you usually work or one of the members of our Fair Labor Standards Act Team.

Note
¹ See Barnick v. Wyeth, 522 F.Supp.2d 1257 (C.D. Cal. 2007), D'Este v. Bayer Corp., No. 07-3206 (C.D. Cal. 2007), Menes v. Roche Labs, Inc., No. 07-00702 (C.D. Cal. 2008).

Read more about FLSA issues on the Womble Carlyle FLSA Blog.