Abbott Should Pay Overtime To Sales Reps: Judge
9 CommentsBy Ed Silverman // June 14th, 2010 // 2:17 pm
In a victory for sales reps, a federal court judge has ruled Abbott Lab reps are not exempt from overtime provisions of the Fair Labor Standards Act and, therefore, should be paid overtime. The ruling, which came in the form of a summary judgment and is now headed to trial to determine damages for about 80 Abbott reps, is the latest in a highly contentious decision that has divided courts across the country and, some lawyers speculate, could eventually reach the US Supreme Court.
The FLSA’s overtime compensation requirement doesn’t apply to employees who work as outside salespeople, but the law does require employers to pay overtime for hours worked beyond 40 hours a week, unless a FLSA exemption applies. What are those exemptions? If an employee’s primary duty is to obtain orders or contracts (as defined by the statute) and regularly does so away from the employer’s place of business.
Drugmakers argue their sales reps are, indeed, outside salespeople who close sales because the primary customer is the physician. But recently, the US Department of Labor added an unexpected twist to the debate by filing an amicus brief with a federal appeals court contending that a lower court was wrong to toss their lawsuit (see here). Some courts remain unconvinced. Last fall, a federal judge ruled in favor of Glaxo (see here).
In the latest ruling, however, US District Court Judge Ruben Castillo of the Northern District Court of Illinois, decided the Labor Department’s “interpretation is both persuasive and consistent with our analysis of the regulations (which) dictate that if an employee does not make any sales or obtain any sales orders or contracts, then the outside sales exemption does not apply.” He also rejected Abbott’s argument that reps are exempt from overtime as administrative employees. To qualify for the exemption, employees must exercise discretion and independent judgment “with respect to matters of significance.” The DOL maintains reps don’t have that kind of independence since they’re given lists of docs to visit and must present scripted messages.
Lawyers for the plaintiffs rejoiced. “This is the first court in the country to grant summary judgment in favor of the reps on both outside sales and administrative exemption,” says Michael DiChiara. Adds Charles Joseph of Joseph, Herzfeld, Hester & Kirschenbaum: “Outside of New York and California, the Northern District of Illinois is considered a bellwether…This decision will be submitted to other courts and build momentum for our side.” We await word from Abbott and whether an appeal is planned.
M Helm, MD
It is difficult to understand how a territory (or hospital rep) could be be an outside sales person. They do not meet the standard of the statute as they do not actually sell or take orders. They represent the products they promote by following a carefully crafted and legally constrained promotional message. With increased central office dictates on call frequency and routing, the only discretion most PhRMA reps get to exercise is the day or the week or time of day they call on a clinic, and what, if any food items/refreshments they should bring. Even the promotional weightings and centrally determined (even though all sales are denominated in dollars).
This may turn out to be a pyrrhic victory. I have known reps who rountinely worked 50 or more hours weekly. But for every one of those there were likely three others who worked considerably less than 40 (or 35) hours weekly, hoping that no one would notice. It should not be terribly surprising that one’s sales results are not necessarily correlated with one’s sales ability or one’s effort. Proving who works what hours, and whether or not the hours worked are actually productive will invite an even higher level of scrutiny to PhRMA representatives. At this point, anything which makes the carrying costs of PhRMA reps higher is likely to accelerate shedding of corporate positions in favor of contract detailers or other alternative methods for delivering marketing messages to prescribers.
Rambo
I agree with Helm. As an Abbott rep myself, who works more than 50 hours a week, these plantiffs have done me and my family no favors. I only see the increased speed with which this industry will shed jobs. I for one hope that Abbott apeals this ruling.
doc
Pharma reps are not sales people - they are merely marketing puppets that relay pre-digested marketing messages. If one looks at the most recent analysis of actual face time with providers in 2009, they are without a doubt one of the most overpaid group of workers for the minimal time spent with actual “customers”.
union guy
I worked for abt for four years and was an early opt in to this suit. The job blew. I worked 60 plus hours a week visitng doctors in palookaville towns where the local pharmamcies did not even report. The micromanaging by the incompetent dm added more drama and ridiculous busy work tasks to an ever more pathetically stupid job.
The detail primary care rep days are over.
I am glad I am out of it and recognize the courts for stating something everyone in a reps job should know. Detail reps are not salesman.
For those of you still changing prescribing habits LOL good luck!
Paul
Rambo, commendable that you work 50 hours a week. But I don’t buy it.
I’ve known quite a few sales reps from different companies and they never worked a full 40 hour week!! Plus in the middle of the day they had all the freedom in the world to go to the dry cleaners, make personal appointments, etc. Things that inside people have to go through hoops for.
pharmavet
One reason that Abbott is so successful is that everyone who is in a position to negotiate a contract is told to drive hard and then some to get the best deal. I can only speak for R&D but my outside contractors were always complaining that “Abbott forces people to work for 25 cents on the dollar”. You know what? The vast majority of them took the deal nevertheless. I’m sure that when the sales force goes completely contract, as it will elsewhere, the result will be the same. A different group of unhappy reyps and a hugely profitable company.
I also did ride-alongs with reps. I can buy into the 50 hours/week, but very little of that involves actual face time with the docs.
Mr. Experience
Pharmavet,
If the rep is assigned to an area where the doctors are far and few inbetween, then you say, that’s his problem, as he had no “face time”? So, therefore, he is working less. I think NOT!
pharmavet
Mr. Experience, as far as I’m concerned, work is work, face time or not. Where the company is concerned is the shrinking value of their ROI/rep BECAUSE of the decreasing face time, among many other factors.
pitbullstew
I wonder if Stephen G (pay me what I want or I will let you die) Sudovar past president of Hoffman La Roche, Stephen G. Sudovar (Executive Chairman and Interim Chief Executive Officer) … of the Pharmaceutical Research and Manufacturing Association (PhRMA).
Has read this article yet?