Published On: Wed, May 16th, 2012

Pharmaceuticals Companies Do Not Have to Pay Sales Reps Overtimes

Pharmaceutical companies are not required to pay sales representatives overtime as they qualify for the administrative exemption under the Fair Labor Standards Act, the 7th Circuit ruled.

Separate cases involving two global pharmaceutical companies based in Illinois and Indiana were consolidated before the three-judge appellate panel. The panel sought to determine whether the companies’ sales representatives qualify for the administrative or outside sales persons exceptions to FLSA requirements, under which employers must pay over time, or time-and-a-half for hours worked in excess of forty hours a week, reported Court House News.

Lilly and Abbott, employ sales representatives nationwide, who spend most of their time preparing for, making and documenting sales calls. Representatives use a variety of techniques – including conducting on-site visits, holding lunch meetings, and sponsoring educational presentations – in order to meet with physicians.

Over the objections of the Department of Labor, the 7th Circuit found that the representatives qualified for the administrative exception to the FLSA overtime pay requirements.

7th Circuit Judge Kenneth Ripple held that the representatives’ work constituted general business operations because of their essential role in promotions.

“The representatives here are the principal ongoing representatives of the company to the professional community that is in a unique position to make, or deny, a viable market for the company’s product. They do not make individual sales of medications, but ensure, on a continuing basis, that the medical community is fully aware of the potential of the company’s pharmaceutical products and that the same community is confident that the company’s products will be effective tools in the practical setting of a medical practice.”

The court also held that the freedom sales representatives have to tailor the companies’ core message to individual physicians constitutes an exercise of “discretion and independent judgment.”

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