The Seventh Circuit recently weighed in on whether pharmaceutical sales representatives are exempt under the FLSA in Susan Schaeffer-LaRose v. Eli Lilly & Company. In this consolidated case, the Seventh Circuit focused on the administrative exemption in determining that the sales representatives were exempt. Because the Court found that the sales representatives met the administrative exemption, it did not address the outside sales exemption. This decision is noteworthy because it is contrary to the more recent trend where such sales representatives were found not to meet the exemption.
The Second and Third Circuits had previously ruled on this very issue in Novartis and Smith, respectively, while the application of the discretion and independent judgment prong in the pharmaceutical sales context was a question of first impression for the Seventh Circuit. In Novartis, the sales representatives were found not to meet the administrative exemption, while in Smith, the sales representative did exercise the necessary discretion and independent judgment to meet the exemption. In its opinion, the Seventh Circuit analyzed both of these prior rulings, as well as the Department of Labor’s regulations, rejecting the arguments of the Plaintiffs and the Department of Labor that the sales representatives in the instant consolidated case were not exempt.
After examining the record, the Court was convinced that the sales representatives performed work directly related to the general business operations of the employer and were required to exercise a significant measure of discretion and independent judgment in their daily duties. Specifically, the Court focused on the fact that these sales representatives were the public face of their employer to the most important decision-makers regarding use of their companies’ products and the freedom in which they were allowed to execute individually tailored and strategic analysis to their work without supervision. As a result, the Court found that they met the administrative exemption.
While the Schaeffer-LaRose case further clarifies the use of the administrative exemption for pharmaceutical sales representatives, it is just one piece of the puzzle. We are still waiting for a decision from the United States Supreme Court in Christopher v. SmithKline Beacham Corp as to whether the pharmaceutical sales representatives meet the outside sales exemption. How the Supreme Court rules will have obvious ramifications on the industry and the exempt status of these sales representatives. If the Court holds that these sales representatives meet the outside sales exemption, the issue will become moot. However, if the Court holds that they do not meet the outside sales exemption, cases like Schaeffer-LaRose, Novartis, and Smith – that address the administrative exemption – will become more important in determining exempt status for pharmaceutical sales representatives. We expect a decision in SmithKline at some point over the summer – so stay tuned!