3rd. Cir.: “Senior Professional Sales Representative” For Pharmaceutical Company Exempt From Overtime Provisions Of FLSA Under Administrative Exemption

Smith v. Johnson and Johnson

The Court below determined that Plaintiff was exempt under the Administrative Exemption, based on her duties and salary while employed as a “Senior Professional Sales Representative.”  On appeal, the Third Circuit affirmed.

Discussing the relevant facts, the Court stated:

“From April 2006 to October 2006, McNeill Pediatrics, a J & J wholly-owned subsidiary, employed Smith in the position of Senior Professional Sales Representative. In essence, Smith’s position required her to travel to various doctors’ offices and hospitals where she extolled the benefit of J & J’s pharmaceutical drug Concerta to the prescribing doctors. J & J hoped that the doctors, having learned about the benefits of Concerta, would choose to prescribe this drug for their patients. Smith, however, did not sell Concerta (a controlled substance) directly to the doctors, as such sales are prohibited by law.

J & J gave Smith a list of target doctors that it created and told her to complete an average of ten visits per day, visiting every doctor on her target list at least once each quarter. To schedule visits with reluctant doctors, Smith had to be inventive and cultivate relationships with the doctor’s staff, an endeavor in which she found that coffee and donuts were useful tools. J & J left the itinerary and order of Smith’s visits to the target doctors to her discretion. The J & J target list identified “high-priority” doctors that issued a large number of prescriptions for Concerta or a competing product, and Smith could choose to visit high-priority doctors more than once each quarter. J & J gave her a budget for these visits and she could use the money in the budget to take the doctors to lunch or to sponsor seminars.

At the meetings, Smith worked off of a prepared “message” that J & J provided her, although she had some discretion when deciding how to approach the conversation. J & J gave her pre-approved visual aids and did not permit her to use other aids. J & J trained its representatives to gauge a doctor’s interest and knowledge about the product, eventually building to a “commitment” to prescribe the drug.

In Smith’s deposition she made it clear that she appreciated the freedom and responsibility that her position provided. Though a supervisor accompanied Smith during the doctor visits on a few days each quarter, by her own calculation Smith was unsupervised 95% of the time. As Smith explained during her deposition, “[i]t was really up to me to run the territory the way I wanted to. And it was not a micromanaged type of job. I had pretty much the ability to work it the way I wanted to work it.” App. at 54. According to Smith’s job description, she was required to plan and prioritize her responsibilities in a manner that maximized business results. J & J witnesses testified (and J & J documents confirmed) that Smith was the “expert” on her own territory and was supposed to develop a strategic plan to achieve higher sales.

Before her visits, Smith completed pre-visit reports to help her select the correct strategy for that day’s visits. At the end of her day, Smith completed post-visit reports summarizing the events of the visits. Smith would refer back to this information before her next visit to the same doctors. After adding up the time she spent writing pre-visit reports, driving, conducting the visits, writing post-visit reports, and completing other tasks, Smith worked more than eight hours per day.

Smith earned a base salary of $66,000 but was not paid overtime, though J & J, at its discretion, could award her a bonus. J & J considered the number of Concerta prescriptions issued in Smith’s territory in determining her bonus. The collection of this data and its direct relationship to Smith’s efforts was, however, subject to error as purchasers might fill their prescriptions in another territory or with a pharmacy that would not release the pertinent information to J & J.”

Applying the Administrative Exemption to the facts of this case, the Court held, that the Administrative Exemption was applicable to Smith.  The Court reasoned, “[w]hile testifying at her deposition Smith elaborated on the independent and managerial qualities that her position required. Her non-manual position required her to form a strategic plan designed to maximize sales in her territory. We think that this requirement satisfied the “directly related to the management or general business operations of the employer” provision of the administrative employee exemption because it involved a high level of planning and foresight, and the strategic plan that Smith developed guided the execution of her remaining duties. See29 C.F.R. § 541.203(e) (“Human resources managers who formulate, interpret or implement employment policies and management consultants who study the operations of a business and propose changes in organization generally meet the duties requirements for the administrative exemption.”); Reich v. John Alden Life Ins. Co. ., 126 F.3d 1, 3-5, 12 (1st Cir.1997) (applying administrative employee exemption to marketing representatives who dealt with licensed independent insurance agents who, in turn, dealt with purchasers of insurance products).

When we turn to the “exercise of discretion and independent judgment with respect to matters of significance” requirement, we note that Smith executed nearly all of her duties without direct oversight. In fact, she described herself as the manager of her own business who could run her own territory as she saw fit. Given these descriptions, we conclude that Smith was subject to the administrative employee exemption. Cf. Cote v. Burroughs Wellcome Co., 558 F.Supp. 883, 886-87 (E.D.Pa.1982) (applying administrative employee exemption to medical “detailer” even though description of employee’s duties was more parsimonious than Smith’s description of her duties here).

Smith nevertheless has asked us to limit the significance of her testimony and find that she lacked discretion with respect to matters of significance. Indeed, her attorney contended at oral argument on this appeal that Smith overinflated her importance during the deposition, and that we should consider her statements mere puffery. We are unwilling to ignore Smith’s testimony to hold that there is an issue of material fact merely because of Smith’s request that we do so. In this regard, we point out that when Smith testified she surely understood the significance of her testimony in the context of this case. In the circumstances before us, we accept Smith’s deposition testimony as an accurate description of her position and thus we will affirm the order granting J & J summary judgment.^FN3

In reaching our result we have not overlooked our opinion in Martin v. Cooper Elec. Supply Co., 940 F.2d 896 (3d Cir.1991), on which Smith heavily relies. Rather, we find that Cooper is distinguishable on the facts. Moreover, we agree with the District Court that changes in the Secretary’s regulations since Cooper make that case inapplicable here. See Smith, 2008 WL 5427802, at *8-9.”

Interestingly, neither the Court below, nor the Third Circuit, reached the hot button issue of whether Smith was subject to the Outside Sales Exemption, despite the fact that the issue was briefed both on Defendant’s Motion below, and on cross-appeal.