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U.S.S.C.: Court Denies Certiorari to Novartis and Schering on Appeals of Decisions Finding Pharma Reps Non-Exempt Under the FLSA
Novartis Pharmaceuticals Corp. v. Lopes, Simona M. and Schering Corporation v. Kuzinski, Eugene, et al.
In a case with far sweeping ramifications for the pharmaceutical industry and its employees, following the Second Circuit’s decision that found pharmaceutical representatives (pharma reps) to be non-exempt and therefore, entitled to overtime, the Supreme Court has denied Plaintiff’s Petition for Cert, and therefore the issue remains largely unresolved. In a decision discussed here, the Second Circuit had previously held that the pharma reps were non-exempt, notwithstanding the pharmaceutical companies’ arguments that they were outside sales and/or administrative exempt. However, the Third Circuit, on facts it acknowledged were limited to the case before it, recently reached the opposite conclusion, holding Johnson & Johnson pharma reps to be exempt under the administrative exemption. Most recently, the Ninth Circuit held that, notwithstanding the fact that pharma reps cannot and do not consummate sales, their promotional activities are close enough to render them exempt under the outside sales exemption.
The Department of Labor had submitted an Amicus Brief in support of the employees in both the Second and Ninth Circuit cases. While the Second Circuit relied on the DOL’s Brief in large part, reaching its conclusion that the pharma reps are non-exempt, the Ninth Circuit rejected the arguments in the Brief.
It will be interesting to see if the large pharmaceutical companies, most of whom are in the midst of FLSA collective actions and/or state wage and hour class actions, will reclassify their pharma reps based on the Novartis decision. The stakes are huge, and the risk- if they chose not to- could be an imposition of liquidated damages, in addition to unpaid wage awards in any case(s) the employees win.
USSC: Plaintiff’s Petition for Certiorari Denied Regarding Calculation of Damages for “Salaried Misclassified” Workers
Urnikis-Negro v. American Family Property
In a case where the United States Supreme Court could have decided the oft-raised issue of how to calculate an employee’s damages, following a finding that they were “salaried misclassified,” the Supreme Court has denied Plaintiff’s Petition for Cert, and therefore the issue remains largely unresolved. In a decision discussed here, the Seventh Circuit held that the proper calculation of damages in such a situation was the the “fluctuating workweek” methodology, rather than time and a half. The Fourth Circuit held that only “half-time” damages are due when an employee is salaried misclassified recently too. This decision was widely watched by Wage and Hour practitioners, because of the impact the calculation issue has on damages for such employees who are misclassified. Under the fluctuating workweek calculation, an employee who was salaried and misclassified receives less than one third the damages he or she would receive if the award were made at time and a half.