Novartis’s Overdue Overtime Payments
Organized labor is on the ropes, to put it mildly. Wisconsin, Ohio, and other states are on the brink of taking collective bargaining rights away from state employee unions. That’s why last week’s US Supreme Court action was particularly welcome to employees inside and outside the pharmaceutical industry.
By declining to hear Novartis’s appeal, the US Supreme Court left intact a Second Circuit Court ruling that pharmaceutical sales representatives are entitled to overtime pay. Other companies have taken notice because the Supreme Court’s action will affect the entire pharmaceutical industry.
For years, Novartis and its competitors have argued that sales reps fell under the “Outside Sales” or “Administrative” exemptions to overtime pay under federal, New York, and California law. When sales reps sued Novartis for compensation, the US Department of Labor (DOL) filed an amicus brief on their behalf, saying that the two exemptions did not apply to them. The Second Circuit gave deference to DOL’s opinion, ruling that Novartis must pay retroactive compensation to their sales reps. Novartis is now estimated to owe at least $100 million to 2500 current and former sales reps.
Like Novartis, Merck had a similar case before the Supreme Court and also failed to get a hearing. In its brief, Merck pointed to appellate courts that had not given deference to DOL’s amicus brief, but the Supreme Court’s denial of a hearing essentially nullifies that argument.
The current case reminded me that only four months ago, a US District Court found that Novartis had discriminated against its female employees, paying them less and promoting them less often than their male counterparts. This pair of cases certainly gives the impression that Novartis is not exactly a worker-friendly company.
Perhaps this latest defeat will lead Novartis to consider workers’ rights and labor law more seriously in the future. The outcome of the lawsuit at least provides hope that employees’ grievances ultimately can be redressed. These days, workers need all the hope they can get.
One word – organize. Is there any reason sales reps cannot form a union, and collectively bargain? Yes, it is a hard scary fight, but I think the whole country now realizes that without strong unions, the corporations dictate the terms. We go lucky with this court decision – the next decision won’t benefit workers unless we act now.
Sales reps are salaried employees with very nice incentive packages, i.e. company car at almost zero cost to the employee, work from home base, bonus structure often above and beyond other salaried employees in similar pay range, among others. This is a scary case for employers because this could open the door to other salaried employees clamoring for overtime pay.
Unionization isn’t the answer. Executives doing right by their employees is the answer. But let the sales reps unionize anyway. Pfizer is already moving towards a fully outsourced sale rep model. I don’t think the union will help the sales reps much in such a case.
I have watched many companies close because of Unions. There are times when wages need to be raised to be equitable, but the power of the unions is that they can sometimes raise wages and benefits to unrealistically high levels. These levels can be above what the market can sustain, which will cause the manufacturer to raise the costs of items that it produces. The trickle-down effect and the increases in costs are passed on through the distribution chain to the end user, who inevitably is the worker initially represented by the union. Strikes also make union members look greedy, especially if they are in a high-earning job compared to many other workers. And those that represent the unions make such a high salary that is ridicules. I am watching a hospital in our area go through a battle with a Union and when the hospital brought in temps the unions came unglued. To heck with the patients wellbeing we want our money is the message they are sending. I have no use for unions. If one does not like what they are making or the working conditions go get another job. Personally I will not deal or purchase anything from a company that has a union.
Isn’t it going to be a Pyrrhic Victory? Is it going to speed up Novartis to announce like many of its competitors new job cuts in their field force?
In less than 3 years, the number of US medical reps fell from more than 100.000 to less than 70.000.
I believe that this industry doesn’t need unions but new molecules to launch and create jobs.
The author seems to view this ruling as a victory for the working man, but it couldn’t be less so. The essence of this ruling, backed by the Obama Dept. of Labor (DOL), is that pharma reps aren’t actual sales reps. In this case DOL specifically contended that pharma reps lack the independent discretion and judgement characteristic of a sales person. Rather, DOL contends, pharma reps perform highly restricted activities and deliver scripted messages. There may be some truth to that, largely because the FDA has expanded its prerogative to regulate “labelling” to a dubious extreme.
Clearly, “real” sales reps qualify for an exemption from overtime. How can anyone think that this ruling, based on pharma reps not having sufficient judgment and independence, is a good thing for the pharma rep profession? The solution for industry is not to convert field forces into legions of hourly-wage automatons, but rather to upgrade the profession in the direction of scientific knowledge and clinical partnership. Give them real discretion and independence, and they will be legitimately exempt from hourly work rules. The process of elevating the professional is already underway, and that, not this ruling, will be the real victory for pharma reps.
Also, the focus of this case, that is, pharma reps and overtime pay, applies to the entire US pharma industry, and not just Novartis. It is completely unrelated to the sexual discrimination lawsuit against Novartis, and it’s nonsense to relate these two cases under the theme “that Novartis is not exactly a worker-friendly company.”
Finally, unions have devasted every US industry in their grasp, and now are bankrupting countless states and municipalities. The empirical evidence of the last 40 years is overwhleming: unions destroy productivity, profits, companies and whole industries.