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Virtually every big pharma company has been or is being sued for allegedly violating the FLSA and applicable state wage and hour laws in collective actions brought by former and/or current drug company sales representatives. The dispute focuses on the meaning of “outside sales employees” under the FLSA, with drug reps claiming that their job duties never actually include a “sale,” thus rendering the exemption inapplicable.
The general rule for “outside sales employees” is that the employee’s primary duty is
The exemption further requires that the employee “customarily and regularly” be engaged in this primary duty away from the employer’s place(s) of business. Under the FLSA, “sales” can be of services as well as commodities, and is broadly defined. Drug reps argue that they themselves are never part of a sale of the products they promote since they only interact with physicians, not with the ultimate purchaser of their products - patients - who take the prescription received from their physician to a pharmacy for filling and purchase. These layers of people and companies, drug reps assert, render the exemption inapplicable to the drug reps, allowing them to seek overtime wages for their otherwise uncompensated long hours. Unsurprisingly, big pharma employers have disagreed, arguing that drug reps are hired for sales-based positions, based on their past sales experience and training, and paid according to commissions reflective of the total amount of the products sold in the rep’s territory or region. Thus far, courts have sided with the employers granting summary judgment against the drug reps finding that the purpose of the drug reps work is a sale of a product and the physician, through prescriptions, control these sales.
Currently, this issue is the subject of appeals to the Ninth Circuit from three cases previously heard in the United States District Court for the Central District of California and also the subject of a Special Report by the Bureau of National Affairs, Inc. issued on March 26, 2008. Given the unpredictable nature of the Ninth Circuit, pharmaceutical companies should expect some surprises or challenges in the coming months.
In their complaint, Parks argues on behalf of Disney "financial analysts" that their jobs non-exempt because their duties were "routine and repetitive" and required no "consistent exercise of discretion and judgment." For example, job duties included checking cost metrics data for errors and paying invoices and entering data. The suit proposes three separate classes: (i) one FLSA class to include all employees of the company who hold or held the title "financial analyst" or similar title since Feb. 28, 2005; (ii) one California Wage and Hour class to include all California employees who held/hold such position with Disney since Feb. 28, 2004 (due to the longer statute of limitations under California law); and (iii) one class under California law to include employees throughout the United States who held/hold such position with Disney since Feb. 28, 2004. Relief sought includes unpaid past wages, liquidated damages, and interest under the FLSA, as well as damages for every day breaks were not provided and injunctive relief to force Disney to provide required wage statements and to pay workers on time.
Disney affiliated companies have been widely regarded as good employer, establishing several employee-friendly benefits leading to a generally employee-friendly working environment. Nevertheless, Disney affiliates have been sued in the past for overtime issues. In 2001, an arbitrator ordered Walt Disney World in Florida to pay for time spent changing between costumes and personal clothing, and a similar settlement was reached as to Disneyland in California.
For more on the Disney lawsuit, Parks v. Walt Disney Internet Group, et al., case number 2:08-cv-01380 (U.S.D.C., C.D. Calif.), click here to read the complaint.
Misclassification remains a focus of the Department of Labor, more so in low-wage industries (hotel-motel workers, construction, janitorial services, among others) than the subject of this suit. Just this past week, the former administrator of the DOL's wage-and-hour division spoke to the New York Chapter of the Association of Corporate Counsel confirming that misclassification, particularly employers who misclassify their workers as independent contractors, is one of its top five enforcement priorities for 2008. Employers, with the assistance of their counsel, should review their job descriptions and assess their classification of employees in light of the continued governmental interest in these cases.
Another relevant fact may be whether the public employers are treated separately for statistical purposes under the Census of Governments. If the public employers are found to be separate and independent, there is no obligation for the primary employer to include the hours worked by the employees for the joint employer in calculating or paying overtime wages.
As always, if there is a question in an employer's assessment of whether overtime is due to an employee, contacting an experienced FLSA lawyer to analyze the employer's obligations is a must to ensure against unwanted and unintended liability.Click here to read the opinion letter: