KUZINSKI v. Schering Corp.

Citations: 801 F. Supp. 2d 20; 17 Wage & Hour Cas.2d (BNA) 1877; 2011 U.S. Dist. LEXIS 86575; 2011 WL 3438403Docket: Civil 3:07cv233 (JBA)

Court: District Court, D. Connecticut; August 5, 2011; Federal District Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Plaintiffs Eugene Kuzinski, Marc Campano, Jerry Harris, and Shawn Jones filed an Amended Complaint against Schering Corporation, claiming they were misclassified as exempt from overtime under the Fair Labor Standards Act (FLSA). Schering initially sought summary judgment, claiming the plaintiffs were exempt under the 'outside sales exemption,' which the court denied and the Second Circuit affirmed. Schering subsequently filed for summary judgment again, this time arguing the plaintiffs fell under the 'administrative exemption.' The plaintiffs also sought summary judgment to assert they were not exempt under this exemption. The court ruled in favor of the plaintiffs, denying Schering's motion and granting the plaintiffs' motion. 

The relevant facts established that the plaintiffs, as Pharmaceutical Sales Representatives (PSRs), were employed to promote Schering's prescription drugs to healthcare professionals. Schering primarily sells its products to wholesalers and utilizes PSRs to enhance market share through direct engagement with physicians. The PSRs’ duties included meeting with physicians, providing information about products, and participating in training and promotional events. The court noted that the plaintiffs worked outside of Schering’s offices and engaged in activities meant to drive demand for Schering’s products.

Plaintiffs report to a District Manager who supervises their work and may observe them during fieldwork. Pharmaceutical Sales Representatives (PSRs) are restricted to sharing information strictly from their training provided by Schering and can only discuss pre-approved clinical studies. Schering utilizes data on physicians' prescriptions to identify target physicians and monitor product usage trends. During interactions with health care providers, PSRs primarily deliver a 'core message,' though they are not mandated to do so in every call, especially if time is limited. PSRs follow a suggested format for communication, focusing on information related to the product as per its package insert, including indications, contraindications, adverse events, and dosing. The core message is developed and tested by Schering's marketing teams rather than the PSRs themselves.

Training for PSRs includes 'sample openings' and a 'menu of questions' to facilitate effective communication with physicians based on their specific circumstances and historical access patterns. Schering also equips PSRs with responses to common queries and objections, along with 'sample closings' for sales calls. While PSRs are not required to recite a scripted dialogue, they must adhere to the training and not discuss any information beyond it, particularly off-label uses of products. Visual aids and promotional materials provided by Schering are the only materials PSRs can use during sales calls, although they may incorporate their own approved slides into presentations. Schering’s Global Analytics department generates target lists identifying high-volume prescribers, which PSRs are expected to prioritize, though they can also reach out to other physicians as needed for business purposes.

Schering conducts market research to inform sales strategies for its product areas, which is communicated to Pharmaceutical Sales Representatives (PSRs). Plaintiff Eugene Kuzinski stated that his sales approach was standardized with "canned presentations," but he tailored each presentation based on the responses and needs of the doctors he met. His experience allowed him to gauge how to adjust his pitch. Similarly, plaintiff Mark Campano customized his presentations depending on the type of doctor, using more technical details for specialists and simpler explanations for primary care physicians; he also modified the presentation length based on the doctor's interest. Plaintiff Gerald Harris echoed this practice of adapting his approach based on the doctor's specialty and personality, noting that Schering advised him to allocate varying amounts of time to different physicians.

Regarding compensation, Campano's base salary in March 2004 was $71,900, Harris's lowest salary was $86,100, Kuzinski's was $83,000, and Jones's minimum was $72,600.

The Fair Labor Standards Act (FLSA) exempts certain employees from overtime pay requirements, including those in executive, administrative, or professional capacities. To qualify as an administrative employee, one must earn at least $455 weekly, perform work directly related to management or business operations, and exercise discretion and independent judgment in significant matters. The FLSA's exemptions are interpreted narrowly in favor of employees. Plaintiffs acknowledge earning over $455 weekly, fulfilling the salary requirement, but argue that their primary duty—marketing Schering products to physicians—does not align with management or business operations, challenging the second prong of the administrative exemption.

Schering contends that the Plaintiffs’ primary role is to promote the sale of pharmaceutical products, which aligns with Schering’s core business function, thereby meeting the criteria for the administrative exemption under the Fair Labor Standards Act (FLSA). For an employee's duties to qualify as directly related to management or general business operations, they must involve assisting in the overall functioning of the business rather than engaging in tasks like manufacturing or retail sales. Activities must be essential to the business's operation and not merely related to the sale of specific products. 

The distinction between sales roles is crucial; employees who make specific sales are classified as salespeople, while those who engage in broader sales promotion are considered administrative employees. The case of Reiseck v. Universal Communications illustrates this distinction, where a regional sales director focused on specific client sales did not fulfill duties related to management or general operations. Similarly, in Gorey v. Manheim Services, outside sales representatives who targeted individual dealers did not qualify for the administrative exemption, as their primary function was not to promote sales broadly but to secure specific customers. These rulings emphasize that the nature of the sales activity—specific versus general promotion—determines the classification under the FLSA.

The Southern District of Florida, in the case of Palacios v. Boehringer Ingelheim Pharmaceuticals, applied a legal framework regarding the primary duties of pharmaceutical sales representatives (PSRs). It concluded that a representative's role, which involved communicating a scripted core message and assisting sales operations, did not equate to management or general business activities. The plaintiffs in this case did not directly sell products but contributed to Schering's market share by providing approved information to physicians within designated territories. Their activities, while aimed at increasing product demand, were limited to promotional efforts without direct sales or strategic development responsibilities. As such, their role was likened to that of a store employee assisting customers rather than completing sales or designing marketing strategies. The court determined that the plaintiffs' duties did not meet the requirements for the administrative exemption under the Fair Labor Standards Act (FLSA), particularly regarding the necessity for discretion and independent judgment in significant matters.

Schering contends that the Plaintiffs' primary duty meets the criteria outlined in 29 C.F.R. 541.200(a), asserting that they had significant authority and responsibility impacting business operations, including providing expert advice and engaging in strategic planning. In contrast, Plaintiffs argue that their role lacks discretion over significant matters, as they do not participate in marketing strategy or core messaging, are mandated to visit specific physicians and promote certain drugs a set number of times, and must adhere strictly to scripted messages without deviation.

The regulations specify that exercising discretion and independent judgment requires more than merely applying established techniques; it necessitates the authority to make independent choices without direct supervision. Discretion involves evaluating various options and making decisions based on their significance. Key factors for determining whether an employee exercises such discretion include their authority over management policies, involvement in major assignments, ability to impact business operations significantly, and capacity to negotiate or represent the company on important matters.

The Second Circuit's ruling in Novartis concluded that Pharmaceutical Sales Representatives (PSRs) did not exercise the necessary discretion. The court found no evidence that PSRs influenced management policies or engaged in strategic planning, nor did they have authority over significant financial decisions. Their responsibilities were strictly defined, requiring adherence to specific promotional activities and messaging without deviation, paralleling the constraints faced by the Plaintiffs in the current case.

The Novartis Pharmaceutical Sales Representatives (PSRs) did not contribute to the creation of core messaging or promotional materials and were restricted to using only materials provided by Novartis. They were required to maintain regular communication with supervising district managers and participate in performance evaluations. Although Novartis claimed that PSRs had the freedom to choose their visiting order, access strategies, budget allocations, and sample distributions, the court determined that these freedoms did not equate to significant discretion or independent judgment in their primary responsibilities. 

In contrast, the Third Circuit case of Smith v. Johnson & Johnson illustrated a different scenario where the representative exercised considerable independence, managing her territory with minimal oversight and developing her strategic plans. However, the current plaintiffs' roles more closely resembled those of the Novartis PSRs, lacking substantial discretion in matters of significance. While plaintiffs could tailor their interactions with physicians to some extent, their overall activities were directed by Schering's strategy and messaging, which they were not permitted to modify. They were also required to follow a target list provided by Schering, even if they had the option to engage with additional physicians, underscoring that their discretion was limited to day-to-day operations within the framework established by Schering.

In the case being analyzed, the court compared the roles of plaintiffs to those in the Novartis case, noting that plaintiffs did not influence market strategy or core messaging and were restricted to interactions with specific healthcare professionals using only information provided by Schering. Consequently, the court determined that plaintiffs lacked the necessary discretion and independent judgment to qualify as administrative employees under the third prong of the administrative exemption test of the Fair Labor Standards Act (FLSA). Therefore, Schering's motion for summary judgment regarding the administrative exemption was denied, while the plaintiffs' motion on the same issue was granted. The court’s decision emphasized that summary judgment is appropriate only when no genuine issue of material fact exists, and unsupported allegations do not suffice to establish such an issue.