Novartis Agrees to Settle Drug Rep Overtime LawsuitJan 26, 2012 | Parker Waichman LLP
After six years of litigation, Novartis Pharmaceuticals Corp. has agreed to pay $99 million to settle a class action lawsuit brought on behalf of pharmaceutical sales reps who allegedly were illegally denied overtime pay for working more than 40 hours per week. The deal has been tentatively approved by U.S. District Judge Paul Crotty in Manhattan. However, the Novartis overtime settlement is still subject to final approval, and a fairness hearing has been scheduled for May 31.
The lawsuit is one of several filed in recent years by pharmaceutical sales reps, including those working for GlaxoSmithKline, Johnson & Johnson, Bristol-Myers Squibb Co. and a unit of Merck & Co. It has long been standard practice for drug makers to avoid paying overtime for pharmaceutical sales representatives by classifying them as commissioned outside sales people, or administrative personnel, both categories that are exempt from the Fair Labor Standards Act's (FLSA) overtime requirements.
The Novartis sales rep had argued in their lawsuit that they did not qualify as outside sales reps. The lawsuit was originally filed in 2006, but a New York trial judge had agreed with Novartis' contention that the sales representatives did fall under FLSA overtime exceptions for outside salespeople and administrative workers. But in July 2010, the Second Circuit Court of Appeals overturned that ruling. The lawsuit moved forward last year, after the U.S. Supreme Court refused to hear Novartis' appeal of the Second Circuit ruling.
According to a Reuters report, the sales reps impacted by the proposed Novartis settlement worked for the drug maker between 2002 and 2007, and from Jan. 25, 2009, to the present. Payouts will vary based on length of employment and compensation, and on how many plaintiffs choose to take part in the settlement
The U.S. Supreme Court is soon to take up another drug sales rep overtime case, this time involving some 90,000 current and former sales representative for GlaxoSmithKline. The Ninth Circuit Court of Appeals has already ruled that the Glaxo reps are exempt from FLSA overtime requirements.