Rack up another win for pharma sales reps seeking overtime pay. Novartis ($NVS) has agreed to pay $99 million to settle a class-action lawsuit that's been slogging its way through the courts since 2006. Now covering more than 7,000 plaintiffs, the lawsuit claims reps don't qualify as "outside sales" employees, and thus aren't exempt from overtime pay.
The lawsuit is just one of many overtime claims filed against drugmakers in recent years. Reps from a who's who of Big Pharma--and some smaller companies as well--have alleged that Fair Labor Standards Act exemptions don't apply to them. Some suits have focused on the "outside sales" exemption, as the Novartis claims do. Others have zeroed in on the management exemption, claiming reps don't have enough control over their own destinies to qualify as managers under the law.
It's an issue that has split U.S. appeals courts. Ninth Circuit panels have determined reps aren't entitled to overtime, while those in the Second Circuit have determined that they are. All that could be about to change, however: The Supreme Court is preparing to review a GlaxoSmithKline ($GSK) case--in which the Ninth Circuit classified GSK reps as exempt--and its interpretation of the FSLA would then affect the pending overtime suits scattered across the U.S.
The Novartis settlement comes after the Supreme Court refused to reconsider an appeals court ruling, which said the company's reps shouldn't be classified as exempt. Still, Novartis maintains it pays all of its employees "fairly" and its compensation is consistent with the FSLA. "We remain confident that sales representatives should continue to be classified as exempt from overtime because their autonomy and incentive compensation are typical of exempt employees as defined by US law," Novartis Pharmaceuticals President Andre Wyss said in a statement. Nonetheless, Wyss said, the company decided "it is time to resolve these wage and hour claims."
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