Abbott Should Pay Overtime To Sales Reps: Judge

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.