S-P sales reps win another OT round

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Chalk up another victory for sales reps in their fight for overtime pay. A U.S. judge has decided that Schering-Plough sales people don't qualify for the administrative exemption under U.S. labor law, granting summary judgment for the reps in that case. The verdict was expected in light of the U.S. Supreme Court's refusal to hear Novartis' appeal of a similar determination. But the reps' lawyers point out this is the first OT case in which reps have been disqualified from every contested part of the admin exemption.

The company had already lost a bid for summary judgment on the other possible exemption for overtime pay: outside sales. That summary judgment ruling was upheld on appeal. So, Judge Janet Bond Arterton wrote, borrowing an analogy from a previous case, the reps aren't like clothing-store employees "who complete the transaction at the cash register," i.e., close actual sales. But nor are they the management types who "design advertisements for the store" or decide "when to reduce prices to attract customers." They're more like the people at Gap who help customers find the right size and style, she wrote.

Merck, which now owns Schering, could soon find itself wrangling in court over the amount of back pay it owes the class of salespeople, not to mention the number of people included in any settlement. In a statement, the plaintiffs' attorneys say they expect the court to levy double damages for the Fair Labor Standards Act violation; whether that's the case obviously remains to be seen. The Novartis case put that company on the hook for up to $100 million in back pay.

The ruling doesn't settle the overtime question completely, however. Yes, the Second Circuit's rulings in favor of Novartis and Schering reps set a precedent for that region. But conflicting rulings by the Ninth Circuit--and ongoing cases in various jurisdictions--could mean that the Supreme Court eventually does take up an OT case. For drugmakers, the stakes are high. As PhRMA noted in a brief supporting the Novartis Supreme Court appeal, pharma companies could be liable for "staggering" amounts of retroactive pay if the OT trend continues.

- see the release from Joseph, Herzfeld, Hester & Kirschenbaum
- read Judge Arterton's ruling

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