The Battle Over Overtime Pay

The unceasing class-action machinery has once again taken aim at the pharmaceutical industry. This time, however, the threat has come from within. This new class of plaintiffs is not made up of customers, but rather the pharmaceutical companies’ own employees — sales representatives. Fortunately for the pharmaceutical industry, the judiciary has entered the battle and appears determined to shield the industry from this latest siege.

The plaintiffs claim their pharmaceutical employers violated the Federal Fair Labor Standards Act (FLSA), 29 U.S.C.201, et. seq. (2008), by failing to pay sales representatives, or “sales reps,” overtime compensation. Under the FLSA, employers must pay their “non-exempt” employees one-and-a-half times their regular wages for all hours worked above 40 in a regular workweek (i.e ., they must be paid “overtime”). That seems fairly straightforward. What becomes difficult, however, is determining which employees must be paid overtime and which are exempt from this requirement, and thus not entitled to overtime compensation. The two most commonly cited exemptions for pharmaceutical sales reps are: 1) “outside salesman”; and 2) “administrative” employees. Even with only two possible exemptions, the determination is complex and fact-sensitive; a job title alone is insufficient to establish an employee’s exempt status. 29 C.F.R. 541.2. What’s more, the courts — while seemingly able to agree that these employees are exempt — have been unable to agree on why they are exempt.