No. 362 - April
27, 2006
DO YOUR OUTSIDE SALES EMPLOYEES
REALLY “SELL”?
If not, you could have FLSA problems.
By Jim Coleman
Fairfax,
VA
A pharmaceutical representative in New Jersey is suing Novartis for $375 million,
claiming that she and her fellow “reps” are entitled to back overtime
pay and related damages. She’s claiming that, because the reps did not
actually sell product to the doctors they called on, they did not qualify for
the “outside sales” exemption to the overtime provisions of the Fair
Labor Standards Act.
As hyper-technical as it sounds, she could have a case.
The FLSA provides numerous exemptions from its minimum wage and overtime requirements,
one of which applies to outside sales employees – that is, employees whose
primary duty is selling products or services, and who are customarily and regularly
engaged away from their employer’s place of business when performing their
primary duty. This exemption has been part of the FLSA for decades (although
it recently underwent some relatively minor revisions in August 2004 when the
U.S. Department of Labor issued revised “white-collar exemption” regulations).
One of the core requirements of the outside sales exemption is that the employee
is engaged in the “making of sales,” or in obtaining orders or contracts
for services or the use of facilities.
According to the plaintiff’s allegations, Novartis’s pharmaceutical
reps call on health care providers but do not directly sell product. Instead,
they provide promotional material, drop off literature or drug samples, pitch
the benefits of the company’s drug products, and generally market the company’s
offerings. This type of work is considered “promotional work” under
the outside sales regulations, and it may or may not be deemed to be “exempt” work.
The regulations say that promotional work that is “incidental to and in
conjunction with” the employee’s own outside sales or solicitations
is exempt work, but if “incidental to and in conjunction with” sales
made by someone else, it is non-exempt work .
As most employers are aware, the popularity of FLSA lawsuits, and particularly
collective actions on behalf of large classes of employees, has been increasing
dramatically. Given our litigious world, employers who rely on the “outside
sales” exemption should carefully review job duties and responsibilities
to ensure that they are consistent with the requirements of the exemption.
And there is one ray of sunshine: even if your “marketing and promotion” employees
fail to qualify for the “outside sales” exemption, they may qualify
for the “administrative” exemption instead. The requirements for
the administrative exemption are different, but if satisfied, the result will
be just as good – the employees will be exempt from the minimum wage and
overtime requirements of the FLSA.
If you have any questions regarding the FLSA’s exemption provisions, or
need advice on general wage and hour compliance matters, please feel free to
contact any member of Constangy’s
Wage & Hour Practice Group, or the Constangy attorney of your choice.
Constangy, Brooks & Smith, LLC has counseled
employers, exclusively, on labor and employment
law matters since 1946. The firm represents
Fortune 500 corporations and small companies
across the country. More than 100 lawyers work with clients
to provide cost-effective
legal services and sound preventive advice
to enhance
the employer-employee relationship. Offices
are located in Georgia, South Carolina,
North Carolina, Tennessee, Florida, Alabama,
Virginia, Missouri, and Texas. For more information about
the
firm's labor and employment
services, visit www.constangy.com, or call
toll free at 866-843-9555.
