The Seventh Circuit Joins the Fray of the Varying Decisions on Whether Pharmaceutical Representatives are Exempt Under the FLSA

Contributed by Jill Cheskes

Opinions on this issue are all over the board: are pharmaceutical sales reps exempt under FLSA? One case asking this question is currently before the U.S. Supreme Court. However, the Seventh Circuit recently weighed in on whether pharmaceutical sales reps are exempt for overtime purposes under the FLSA and found that, in fact, they were.

Initially, this was raised in two separate cases, one against Eli-Lilly, the other against Abbott Labs. Interestingly, the two district courts involved ruled differently.  The Southern District of Indiana granted summary judgment to Eli-Lilly finding that the sales reps met both the FLSA’s outside sales and administrative exemptions. Conversely, the Northern District of Illinois granted summary judgment to the employees finding that the FLSA’s outside sales and administrative exemptions did not apply.

Ultimately, the Seventh Circuit declined to decide whether the outside sales exemption applied to pharmaceutical sales reps (which is the actual issue before the Supreme Court) but did decide that the administrative exemption was applicable. In so doing, the Seventh Circuit disagreed with a previous Second Circuit’s opinion on the issue but agreed with a previous Third Circuit’s decision.

In looking at the administrative exemption, the Seventh Circuit found, most importantly, that the sales reps exercise discretion and independent judgment while performing their duties. The court was not swayed by the fact that the reps were trained extensively on what they could and could not say during the visit with the physicians. Pharmaceutical sales reps are heavily controlled by federal regulations and the reps relied on “carefully honed messages” and materials provided by their employer to ensure compliance. 

Nonetheless, the court found that sales reps interact with physicians with minimal supervision and tailor their messages to respond to each particular physician’s circumstances. The court found the reps “strategic analysis” of which physicians to visit as well as collaborations with other reps all manifested a “substantial measure of judgment.”  The combined view of all of these issues led the Seventh Circuit to find that the exemption applied.

As stated, the Supreme Court will be deciding whether the FLSA outside sales rep exemption applies to pharmaceutical reps. The Supreme Court opinion will not directly affect the Seventh Circuit’s ruling since the Seventh Circuit did not address the outside sales rep exemption. However, if the Supreme Court finds that the outside sales rep exemption does apply, it will be unnecessary to use the administrative exemption in such a case.