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Are Pharmaceutical Sales Reps Entitled to Overtime Pay?

September 12, 2010

The Commonly held belief is that outside sales representatives do not get overtime pay.  This is because the federal overtime law, the Fair Labor Standards Act (FLSA), specifically exempts outside sales reps from being paid overtime pay.  Normally, the FLSA requires an employer to pay its employees one and ½ times their regular rate of pay if that employee works more than 40 hours per week.

In order for an outside sales representative to be exempt from receiving overtime pay, there are several requirements that must be met.  These are:

1. The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and

2.   The employee must be customarily and regularly engaged away from the employer’s place or places of business.

At first glance, it seems as if a pharmaceutical sales representative would not be entitled to overtime pay.  However, the distinction lies in how the FLSA defines “primary duty” and “making sales”

“Primary duty” means the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.

“Making sales” includes any sale, exchange, contract to sell, consignment for sales, shipment for sale, or other disposition.  What is missing from either of these definitions is an exemption for a person that merely urges doctors to prescribe certain drugs, but does not actually sell anything to the doctor.

A recent case out of the 2nd Circuit Court of Appeals held pharmaceutical sales representatives that merely urge doctors to prescribe certain drugs, under strict guidelines from their employer, are entitled to overtime pay.  In In Re Novartis Wage and Hour Litigation, the Court states that a pharmaceutical sales representative that meets with doctors to obtain a doctor’s commitment to prescribe a certain drug does not engage in “sales” as contemplated by the FLSA.

Novartis also tried to argue that their “sales” reps were exempt from overtime pay because of the administrative exemption.  However, the Court stated that the reps did not exercise discretion and independent judgment simply because the reps could answer the doctor’s questions about the medications.  Based upon this holding, it is anticipated that drug companies will make changes to their sales representatives responsibilities so as to avoid having to pay their reps overtime pay, despite the long hours worked by these reps.

For more information about overtime pay for pharmaceutical reps, or other questions relating to whether a certain employee is entitled to overtime pay, contact attorney Joseph M. Maus at The Maus Law Firm, (866) 556-5529 or visit www.mauslawfirm.com

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One comment

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