Yesterday, a federal district court in New York preliminarily approved a proposed settlement of a wage and hour collective action against Novartis Pharmaceuticals Corp. The proposed settlement amount: $99 million.
The proposed settlement agreement results from two lawsuits filed against Novartis in 2006 under the Fair Labor Standards Act (FLSA) and California and New York state laws. The lawsuits were asserted on behalf of several nationwide classes of pharmaceutical representatives who claimed Novartis unlawfully denied them overtime pay. If finally approved, the settlement would benefit approximately 7,000 current and former pharmaceutical representatives.
Novartis denies any unlawful activity and states that it properly classified the pharmaceutical representatives as exempt from overtime requirements under the FLSA’s outside sales employee exemption. Notably, a separate case is currently pending before the U.S. Supreme Court (Christopher v. SmithKlineBeecham Corp.), which addresses the issue of whether or not that exemption applies to pharmaceutical representatives.
The next step in this proposed settlement is for the court to issue a notice to potential class members with an explanation of the settlement and who it covers. The court will then hold a fairness hearing, which is scheduled for May 31, 2012.
As this case exemplifies, FLSA collective actions are time-consuming, burdensome and expensive for businesses forced to defend the action. For a discussion of the types of proactive steps that employers can take to reduce their risks and potential liabilities under the FLSA, click here.
