By: Allen Smith, J.D., is manager, workplace law content, for SHRM
Rather than wait for the U.S. Supreme Court’s upcoming decision over whether pharmaceutical sales representatives fit within the outside sales exemption of the Fair Labor Standards Act (FLSA), Novartis Pharmaceuticals Corp. and plaintiffs’ counsel in a separate case announced that they had settled nationwide wage and hour claims on behalf of 7,000 Novartis pharmaceutical sales representatives.
The settlement, which the U.S. District Court for the Southern District of New York preliminarily approved Jan. 25, 2012, includes an award of $99 million for eligible class members and 30 percent of the $99 million award in attorneys’ fees.
Risks of Continued Litigation
Plaintiffs’ brief in support of preliminary approval of the settlement noted that both Novartis and the plaintiffs face risks in continued litigation.
The brief observed that the 2nd U.S. Circuit Court of Appeals in In re Novartis Wage and Hour Litigation, No. 09-0437 (2nd Cir. 2010) sent the case back to the district court for a jury trial on the pharmaceutical representatives’ claim that they were unlawfully classified as exempt and denied overtime. The class members averaged total compensation of $91,500 and they worked an average of 10 to 20 hours of overtime each week.
But the plaintiffs face the risk of the Supreme Court upholding a decision by the 9th Circuit that pharmaceutical sales representatives do not fit within the outside sales exemption. In that case (Christopher v. SmithKlineBeecham Corp. d/b/a GlaxoSmithKline, No. 11-204), the 9th Circuit refused to defer to the Labor Department’s position that the exemption did not cover the representatives because their job was to promote their company’s drugs rather than to make final sales.
“We believe this settlement is in the best interest of our employees and the company,” said Andre Wyss, president of Novartis. “We have been litigating this case for nearly six years and the company has determined that it is time to resolve these wage and hour claims.”
In addition to resolving the overtime claims, the settlement resolved claims of the alleged failure to:
-Provide meal periods and/or compensation for rest breaks.
-Provide itemized wage statements.
-Maintain and keep accurate records.
-Timely pay employees during or at the conclusion of their employment.
-Provide compensation for off-the-clock time.
“We consistently compensate all employees fairly in accordance with the U.S. FLSA and applicable state laws,” Wyss stated. “We remain confident that sales representatives should continue to be classified as exempt from overtime because their autonomy and incentive compensation are typical of exempt employees as defined by U.S. law.”
First Firm to Bring Class Action
David Sanford, lead counsel for the plaintiffs and an attorney with Sanford, Wittels & Heisler in Washington, D.C., said, “We are pleased to have secured a $99 million dollar settlement wherein Novartis compensates its sales representatives for years of overtime pay.”
The notice of proposed settlement said that, “Class Counsel Sanford, Wittels & Heisler was the first law firm in the United States to bring a class-action suit alleging wage and hour violations on behalf of pharmaceutical representatives against a pharmaceutical company. Since class counsel filed this suit against Novartis in March 2006, numerous other firms around the United States have brought similar suits against other pharmaceutical companies.”
The notice also stated, “The majority of federal and state courts have ruled against plaintiffs in these actions. Class counsel is the only firm to win both the administrative and outside sales exemptions at the federal appellate level.
Notwithstanding the successes in this litigation against Novartis, the risks remain great that—without this settlement—you and the other members of the settlement class may fail to recover any money for your overtime claims.”
Sanford said, “While we remain confident that the U.S. Supreme Court later this year will uphold the Department of Labor’s interpretation of wage and hour law, the risks of further litigation are great. We are proud that over 7,000 current and former Novartis sales representatives will be able to participate in this settlement. It is a fair and equitable result and can serve as an exemplar for companies around the United States that face wage and hour litigation.”
The agreement remains subject to final court approval, which may take several months.
For more information about wage and hour liability please visit SHRM.com or contact your Emplicity HR Rep at 877.476.2339 ext. 6
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