PHILADELPHIA (CN) – Abbott Laboratories’ pharmaceutical sales representatives are exempt from state and federal overtime law, a federal judge ruled, compounding the split among courts on the issue of overtime pay for such workers.
The Illinois-based Abbott correctly paid the reps as overtime-exempt administrative employees because they engage in considerable “business planning” activities, U.S. District Judge C. Darnell Jones said last week.
In the past two years other federal courts in the 3rd Circuit have applied the same so-called “administrative exemption” to sales reps in overtime cases against Johnson & Johnson, AstraZeneca and Alpharm.
The federal Fair Labor Standards Act exempts an employer from providing overtime pay to administrative employees whose primary duty entails “office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers” or whose “primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.”
Abbotts’ reps are involved in considerable business-planning activities when they formulate and execute strategies to sell the company’s products to physicians in their respective territories, Jones noted in a 13-page opinion filed Tuesday.
Lead plaintiff Gerald Ibanez revealed during deposition that Abbott reps are involved in a litany of administrative activities that “reflect the representatives’ ability to develop strategies; to approach, communicate, and cultivate relationships with physicians; and to operate without constant supervision in the field,” Jones wrote.
“These activities also are consistent with relevant definitions of exempt administrative work because they affect defendant’s business operations to a substantial degree, and involve sales and promotional work on behalf of defendant that reflect the exercise of discretion and independent judgment with respect to matters of significance,” he found.
Though the Northern District of Illinois sided with drug reps in a similar overtime class action against Abbott, Jones refused to let that June 2010 decision justify Ibanez’s call for collateral estoppel.
In the Illinois case, U.S. District Judge Ruben Castillo found that the company’s sales reps applied “defendant’s well established techniques and procedures,” meaning they “do not exercise discretion and independent judgment and thus do not meet the administrative exemption.”
Jones said it would be inappropriate to apply “a foreign District Court’s limited and fact-specific rulings over binding Third Circuit precedent” and ruled that the Illinois case had “no preclusive effect in this matter.”
“In the end, after careful consideration, I agree with defendant that plaintiff regularly exercised discretion and independent judgment in all aspects of his job, including … interactions with physicians, territory business planning, and the planning of events,” Jones wrote.
“I therefore conclude plaintiff is an exempt administrative employee under the FLSA and PMWA,” he added, referring to the Fair Labor Standards Act and Pennsylvania Minimum Wage Act of 1968.
That conclusion contrasts sharply with a pair of 2nd Circuit rulings that found sales reps for pharmaceutical giants Novartis and Schering are not exempt administrative employees with respect to overtime pay.
The Supreme Court in February declined to hear the companies’ appeals of those rulings.