Got Salespeople Classified as Exempt? Better Read This...

Yesterday the 2nd Circuit Court issued what promises to be a landmark ruling on the application of the administrative and outside sales FLSA exemptions to salespeople.

Jon Hyman, in a post on his outstanding Ohio Employer's Law Blog, calls the 33 page opinion (In re Novartis Wage and Hour Litigation) a must-read for any business that employs salespeople and pays them as exempt.  From Jon's post, the highlights:

Outside sales exemption: The sales reps do not qualify for the outside sales exemption because they do not actually sell any products. Instead, in their brief sales calls on physicians, they merely promote their employer’s product. The physician cannot neither buy directly from the rep, not commit to making a purchase:

In sum, where the employee promotes a pharmaceutical product to a physician but can transfer to the physician nothing more than free samples and cannot lawfully transfer ownership of any quantity of the drug in exchange for anything of value, cannot lawfully take an order for its purchase, and cannot  lawfully even obtain from the physician a binding commitment to prescribe it, we conclude that … the employee has not in any sense … made a sale.

Administrative employee exemption: The sales reps do not qualify for the administrative employee exemption because their jobs lack the exercise of discretion and independent judgment. Specifically, the court pointed to the reps’ lack of any role in planning marketing strategies or formulating the core messages delivered to doctors, inability to deviate from the promotional core messages or to answer any questions for which they have not been scripted, and quotas for doctors’ visits, sales pitches, and promotional events.

Click through to Jon's post to learn more about this important ruling and what it could mean for you.

And check out more thoughts and information from Jon on the administrative exemption and the outside sales exemption which are the focus of this ruling.

Image: Creative Commons Photo "Gavel" by walknboston

Comments

[Michael Haberman SPHR]

Wow, that is going to upset some apple carts!

[Ann Bares]

Mike:
That's what I think, too...

[FertilAid for Women]

Hmmm interesting post! Thanks for the link!