Siding with Lilly, appeals court overturns decision in rep overtime case

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The latest round of Sales Reps vs. Pharma has favored...the pharma industry. The Seventh Circuit Court of Appeals said that Eli Lilly did not owe former rep Susan Schaeffer-LaRose overtime, an issue that has continued to pop up nationwide.

Wednesday's decision, which reversed a lower court's ruling that LaRose was entitled to overtime, deals a blow to the Obama administration. The Labor Department had backed LaRose's overtime claims, and the Office of the Inspector General sided with sales reps in Christopher v. SmithKline against GSK which revolves around the same issue: are sales reps considered outside sales teams or more like typical employees? The distinction is not an easy one to make, because the issue isn't about baseline pay—LaRose was a salaried employee

The focus of these cases turns on what these employees can or cannot do: regulations bar sales reps from taking drug orders from doctors. That means the Glengarry Glen Ross directive to “always be closing” lacks the final sales component—transfer of ownership or possession of goods. Plaintiffs say being deprived of that final step puts labor laws on their side, because it marks them as employees, not as outside sales forces, and therefore eligible for overtime.

Pharma companies counter that reps facilitate sales by showing up and talking with doctors about drugs. The companies say these visits trigger sales and are therefore sales calls, which would put the reps in the category of employees who are not eligible for overtime.

In the LaRose case, Lilly lawyers sought to turn the labor department's argument—that LaRose worked as an inside employee—in its favor. In its amicus brief, the labor department had asserted that sales aside, LaRose was given scripts to read to doctors and a visiting schedule over which she had no control. Labor said that this lack of discretion meant she was an employee, not an outsider. Lilly's side contended that this knocked LaRose down to an administrative status, and labor laws don't require OT for administrators. The appeals court agreed.

Consensus has yet to strike on the issue of overtime pay for reps, though. Drugmakers and plaintiffs have been engaged in a long-running battle in the courts, and settlements are piling up. Novartis just settled another overtime suit in January for $99 million. Meanwhile, the Supreme Court has yet to choose sides—it heard arguments in Christopher v. SmithKline Beecham April 16, but has not yet issued an opinion.

GSK spokesman Kevin Colgan couldn't comment on the LaRose-Lilly case but told MM&M that the the overtime issue affects close to 100,000 US employees. He said the issue keeps surfacing and the industry "needs a clear and uniform answer to the question of whether pharmaceutical sales representatives are the kind of outside sales people that the Fair Labor Standards Act excludes from its overtime requirements."

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