The U.S. Supreme Court today refused to review a federal court case that could force Novartis—and possibly other major pharmaceutical companies—to pay overtime to their sales forces.
Without comment, the court denied petitions from Novartis, Merck and the Pharmaceutical Research and Manufacturers Association to review a federal appellate court’s ruling that current and former sales representatives should not be exempted from federal labor law on overtime pay. Most major pharmaceutical companies pay their sales reps based on their performance.
PhRMA, the leading trade group for U.S. drug makers, had argued in its petition to the Supreme Court that the lower court’s decision had "potentially far-reaching ramifications’’ for the industry.
While other major drug makers, including Merck, face similar lawsuits, it was a recent ruling against Novartis that pushed the issue to the Supreme Court.
Last year, a federal appellate court ruled that Novartis was incorrectly exempting its sales representatives from overtime pay requirements contained in the Fair Labor Standards Act. The ruling, according to court documents, was largely based on a brief filed by the Department of Labor that said the sales force was never exempt.
"The appeals court gave deference to the Department of Labor as the body with the most expertise on the requirements,’’ said Jeremy Heisler, a New York City attorney representing sales reps who are suing Novartis.
The appellate court decision leaves Novartis facing an estimated payout of at least $100 million to 2,500 current and former members of its sales force.
"Novartis is disappointed in the Supreme Court’s decision to deny the company’s petition,’’ the drug maker said in an e-mailed statement.
"For decades, companies in the pharmaceutical industry have classified their sales representatives as exempt employees and have compensated them on a pay-for-performance basis, the same way they compensate executives, managers and other professionals,’’ the email stated. "Novartis is evaluating all legal options in light of the decision.’’
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