In another decision addressing the rampant misuse of the outside sales and administrative exemptions by companies, the Court of Appeals reversed a prior favorable decision for Novartis in In re Novartis Wage and Hour Litigation. The Court found that the sales representative were neither exempt outside sales people nor exempt administrative employees.
In this decision, that Second Circuit found that sales representatives were not exempt under the FLSA because they did not actually engage in sales activities. First, the Court found that the salespeople were promoting sales of other, not making sales themselves. Thus, these employees primary duty was not making sales away from the employer’s place of business.
Similarly, the Court found that the sales representatives only performed low level marketing functions. Even though they had some authority to enter into agreements which bound Novartis and had some discretion, the Court found the employees’ duties were not sufficient to make them exempt administrative employees under the FLSA.
This mirrors a similar decision we discussed in April of 2009 against Schering Corporation. The results of these decisions are significant. Given the relatively high pay of these employees, even a few years of overtime could add up to hundreds of thousands of dollars for each employee.
Pharmaceutical companies are not alone. Many industries widely misapply the outside sales and administrative exemptions, and they face similar exposure to overtime liability.