For the second time in the past year, the US Department of Labor has filed an amicus brief with a federal appeals court, contending that a lower court was wrong to rule against sales reps fighting for overtime pay. This time, the agency is supporting two GlaxoSmithKline reps who were told by a federal court in Arizona ruled they are exempt from overtime provisions of the Fair Labor Standards Act. Last fall, the Labor Department filed its first such brief in a case involving a Novartis sales rep (back story). In both briefs, Labor Department attorneys say the lower courts committed "legal error."
A quick primer: The FLSA’s overtime compensation requirement doesn’t apply to employees who work as outside salespeople, but the law does require employers to pay overtime for hours worked beyond 40 hours a week, unless a FLSA exemption applies. What are those exemptions? If an employee’s primary duty is to obtain orders or contracts (as defined by the statute) and regularly does so away from the employer’s place of business.
Drugmakers argue their sales reps are, indeed, outside salespeople who close sales because the primary customer is the physician. In their lawsuit, Glaxo reps Michael Christopher and Frank Buchanan argued, however, that a direct sale doesn’t occur because medicines are actually purchased by patients and hospitals, which receive the drugs from wholesalers.
"The new Deparment of Labor brief is a game changer," says Charles Joseph of Joseph & Herzfeld, whose firm has brought several lawsuits against drugmakers over this issue, which has divided courts around the country. The brief is significant, he explains, because several other lawsuits filed have been stayed pending the outcome of this particular case, which is being heard by the US Court of Appeals for the Ninth Circuit, where the Labor Department filed its brief. Other cases are already on appeal to this court, he adds.
In a lower court ruling in the Glaxo case, US District Court Judge Frederick Martone sided with drugmaker. Here’s what he wrote in his ruling last fall: “The pharmaceutical industry is unique in that federal regulations prohibit a direct sale to an end-user, thereby shifting the focus of sales efforts from the consumer to the physician - the catalyst behind any pharmaceutical sale. A (sales rep’s) ultimate goal is to close an encounter with a physician by obtaining a non-binding commitment from the physician to prescribe the PSR’s assigned product...In all regards, a PSR engages in what is the functional equivalent of an outside salesperson and to hold otherwise is to ignore reality in favor of form over substance.”
In its brief, the Labor Department countered by writing: "Under the Department of Labor’s regulations, the reps do not meet the requirements for the outside sales exemption. The reps do not sell or take orders for...GlaxoSmithKline's drug. Rather, they provide information to target physicians about GSK’s drugs with the goal of persuading the physicians to prescribe those drugs to their patients. The actual sale of drugs takes place between GSK and pharmacies.
"Although the reps’ duties bear some of the indicia of sales - they use methods of persuasion similar to those of salespersons, they receive some of their compensation in the form of incentive compensation, and their promotion work affects GSK’s actual drug sales - the fact that the reps do not actually 'make sales' conclusively demonstrates that the position is not that of an outside salesperson consistent with the Department’s legislative rules."
10 Comments
It is my belief that the reason these people are going after the pharmaceutical companies has more to do with the way they have been treated rather than the money.
Reps had a fun job for many years where there was not the intense pressure to push and push doctors in order for them to hit their goals. Higher and higher goals often unrealistic, management by fear (in my opinion the current environment at GSK) pushed reps to the point of nervous breakdowns at times. Hours worked were low in the years of the past and that gave the industry a bad reputation. Now the companies have conference calls before and after the work day. Administrative work has increased ten-fold and has to be done in the evenings and often on the weekends. Lunch appointments add as well. Management at these companies no longer view sales jobs as one with a flexible schedule to work when you need to to get the results you want or need to achieve. If you work all day longs and all evening long there is no flex time given. Part-time or job share reps work 3 days a week are often required to work on their days off for no compensation. With a job that was a 25 to 30 hour job in the past has become a 60+ hour job just to get everything done that need to be. Sure one can work 40 but that would require 20+ hours out of the "field". In addition to the increased hours the average bonus for reps have been cut at least in half. With performance plans that are likely looking to get rid of people in an effort to cut headcount before layoffs nobody wants to sacrifice time out of the field. Much of the sales numbers depends on things beyond the control of a rep.
So in the end these companies have been treating reps horrible for the last few years and are not very transparent about layoffs. It is one big pressure cooker with no end in sight. These companies can not have it both ways when it comes to exempt or non-exempt employees. GSK has a 35 hour work week but local management is requiring 45 hours in many cases or your job is in jeopardy due to disciplinary action. There is extensive evidence of this from regional and local managers requiring reps to sign "homemade contracts" or regional or district expectations with all of this spelled out. That is all the proof that is needed for these cases to move forward. I do not feel sorry for them if it ends up costing them money in these lawsuits.
So the reps liked the bonuses that came with exceeding "sales" goals that would only go to exempt employees, but now that they are missing "sales" goals and not getting the bonuses, they claim they should be non-exempt. Interesting. Maybe they should pay back all those bonuses they got for "sales" since they don't actually sell anything.
Reps are not true sales people, they are marketing/ Promotional people. There are also so many factors involved -formulary, co-promotion, etc, sales cannot be attributed to an individual rep.
In the companies I've worked in, non-exempt employees at the senior and midlevel management levels, (i.e. above the sales rep. level), got bonuses for exceeding sales goals.
Salmon
It is hard to exceed sales goals when you do not actually sell anything. You can convince someone to take action and write a prescription for the appropriate patient who could benefit from product x. But the problem then is will the prescription get filled? Does insurance cover it? Will the person be willing to pay the copay for it? The rep did their job to get the doctor to put the pen to the paper after that it is out of their control. So is that a sale? Clarkkent is missing the point. It is not about bonuses it is about the hours the company requires people to work. Every year there is added work that is not part of the sales call that requires much time either after work hours or time away from making sales calls during work hours. If the rep should take time away from sales calls to do this work many managers would take issue with that and fire them.
The goals and low bonuses lead to desperation from management causing lots of pressure to come up with better detailed plans and extra busy work. This required more time away from the customer. The goals were unrealistic and thus the vast majority of the entire country did not meet their target goals. When only a handful of territories in the country hit goal there is a forecasting problem. Or is it a pharmacy reporting problem?
There are several reasons referred to above about why perception, and for that matter the quality, of pharma reps has diminshed significantly. This includes: 1) rapid organizational growth that led to a dilution of expertise, including management and competing “armies” of reps per company, per product, per indication. These reps had limited training to “core messages” (Ken & Barbie) vs. a source of high quality information; 2) Sales data proliferation/depth tied to rep performance. This created exteme pressure to generate Rx’s & other activity metrics. 3) MD’s need for increased patient volume to maintain revenue. Less time, and patience, for reps. Time = $ 4) Corporate cost savings initiatives Decreased sales productivity, patent cliffs led to FF contraction
The pharmaceutical rep is about to go the way of the dodo. You’ve now got reps suing their own companies for overtime, saying that they are no more than robots parroting an identical message on every call, with no discretion, adjustment or judgment to the physician or situation. These very reps and lawsuits will end this job function, and it’s too bad. I can personally attest to cases of physicians calling reps into offices to thank them for literally saving patients lives, based on the information and/or resources the rep provided.
I think the courts and the amicus brief filed by the Dept. of Labor and the Fair Labor Standards Act folks are parsing this a little too thinly (they say it overtime should be paid). The job is to change behavior, and although the "former rep" above is correct in terms of other impacts on the generated prescription, the fact is that succesful reps do generate changed behavior in prescribing. That is their job, and it is sales. And it is not a bad thing as long as the recommendations for prescribing are for the right clinical situation and the right patient.
I do agree though about the administrative time. The job is not the same, nor as fun, as it used to be.
Management really messed things up when they thought if they had 500 reps selling 600 million dollars worth of a drug that 1000 could sell 1.2 billion and 2000 could sell 2.4 million. Then the Barbie and Ken hiring started, Lunches became the norm instead of the exception. WE had Dine and dash, turkey and dash, car wash and dash. The doctors merely choose 1 of 3 or 4 drugs out of the same catagory which were very much the same.
Science has not kept up with the patent clocks at all!
GSK put themselves in this position because they chose to start strong-arming their reps rather than treat them like professionals. Piling on busy work to micro-manage reps out of the business because revenue was/is down. They fired hundreds of reps for the smallest of things that didn't matter... all to save a buck because firing people is cheaper than laying them off. GSK's record of immorality is years long.
They constantly lie to the public, thier employees and their customers. GSK's track record of guilt is evident in thier long history of FDA violations and fines. They violate manufacturing standards, hide harmful safety data from the FDA and patients while they contiue to promote dangerous drugs like Avandia. You don't have to take my word for it- google it.
There will always be people out there that don't like being bullied and will punch back. I think that is all that these 2 guys are doing. Good for them. I hope they get a few million bucks out of these immoral crooks.
Former rep, I've heard the same things from other long-time reps, but they stayed with GSK or other cos. because "the money was too good". What does that say?