In consolidated cases decided on May 9, 2012, the U.S. Court of Appeals for the Seventh Circuit (which covers employers in Illinois, Indiana and Wisconsin) held that pharmaceutical sales representatives employed by Abbott Laboratories, Inc. and Eli Lilly & Co. are exempt from overtime pay requirements under the Fair Labor Standards Act’s “administrative” exemption. In so holding, the Seventh Circuit joins the Third Circuit, which similarly held in February 2010 that Johnson & Johnson sales representatives were covered by the administrative exemption. On the other hand, the Second Circuit ruled in July 2010 that the administrative exemption did not apply to sales reps of Novartis Pharmaceutical Corp.
The Seventh Circuit’s ruling on the administrative exemption comes at a time when the U.S. Supreme Court has heard arguments, and expects to rule next month, in a case addressing whether the FLSA’s separate “outside sales” exemption applies to pharmaceutical sales reps employed by GlaxoSmithKline PLC. Depending on the Supreme Court’s ruling and the particular circumstances of the employees involved, employers in the Seventh Circuit may soon have a double-barreled argument that their outside sales employees are exempt from FLSA overtime pay requirements under both the administrative and outside sales exemptions. The consolidated Seventh Circuit cases are Schaefer-LaRose v. Eli Lilly & Co., No. 10-3855, and Jirak, et al. v. Abbott Laboratories, Inc., Nos. 11-1980 and 11-2131.©2013 Drinker Biddle & Reath LLP. All Rights Reserved