Novartis Pharmaceuticals Corp. is set to pay a whopping $99 million to settle charges it illegally denied overtime pay to its drug sales reps. According to a report from Bloomberg News, the Novartis overtime pay settlement covers more than 7,000 current and former sales representatives.
“We believe this settlement is in the best interest of our employees and the company,” Andre Wyss, president of Novartis Pharmaceuticals, a unit of Novartis AG., said in a statement. “We have been litigating this case for nearly six years and the company has determined that it is time to resolve these wage and hours claims.”
The settlement, which was approved yesterday by U.S. District Judge Paul Crotty in Manhattan, resolves unpaid overtime lawsuits brought by Novartis drug reps in 2006, as well as some filed more recently, Bloomberg said. According to a Reuters report, the sales reps worked for Novartis 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 agreement is subject to final court approval, with a fairness hearing scheduled for May 31.
In the original class action lawsuit, Novartis sales reps maintained they did not qualify as “outside sales” employees, and thus aren’t exempt from overtime pay under the Fair Labor Standards Act (FLSA). The lawsuit was just one of many overtime claims filed against drug makers in recent years. 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 FLSA overtime requirements.
As we reported previously, a New York district judge had originally agreed with Novartis’ contention that the sales representatives fell under overtime exceptions to the FLSA for outside salespeople and administrative workers. But in July 2010, the Second Circuit Court of Appeals overturned that ruling. Last year, the U.S. Supreme Court refused to hear Novartis’ appeal of the Second Circuit ruling, and the lawsuit was allowed to proceed.
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. What the High Court ultimately decides could impact drug sales reps who currently have lawsuits pending against Johnson & Johnson, Bristol-Myers Squibb Co. and a unit of Merck & Co.