In the
United States Court of Appeals
For the Seventh Circuit
No. 10-3855
S USAN SCHAEFER-L AR OSE,
Plaintiff-Appellant,
v.
E LI L ILLY & C OMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 07 cv 1133—Sarah Evans Barker, Judge.
Nos. 11-1980 & 11-2131
JAMES JIRAK, et al.,
Plaintiffs-Appellees,
Cross-Appellants,
v.
A BBOTT L ABORATORIES, INC.,
Defendant-Appellant,
Cross-Appellee.
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 07 cv 3626—Ruben Castillo, Judge.
A RGUED O CTOBER 18, 2011—D ECIDED M AY 8, 2012
2 Nos. 10-3855, 11-1980 & 11-2131
Before E ASTERBROOK, Chief Judge, and R IPPLE and
K ANNE, Circuit Judges.
R IPPLE, Circuit Judge. These two cases, which we have
consolidated for opinion, involve the application of the
outside sales and administrative exemptions of the Fair
Labor Standards Act (“FLSA” or the “Act”), 29 U.S.C.
§§ 201-19, to pharmaceutical sales representatives em-
ployed by Eli Lilly & Co. (“Lilly”) and Abbott Laboratories,
Inc. (“Abbott”). The plaintiffs in each case claim that,
during their tenure as sales representatives with these
pharmaceutical companies, they were misclassified as
exempt employees and denied overtime pay, in violation
of the statute.1 The employers contend that both the
administrative exemption and the outside sales exemp-
tion, 29 U.S.C. § 213(a)(1), remove the sales representa-
tives from the overtime protections of the FLSA. The two
district courts in the present cases reached opposite
conclusions, each relying on cases decided by other
circuits.
Before this court, the Department of Labor (“DOL” or
the “Department”) has participated as amicus curiae in
case number 10-3855 and has asked us to consider its
arguments in our disposition of cases 11-1980 and 11-2131
as well. In the Department’s view, the plaintiffs are
1
With respect to case number 10-3855, Plaintiff Susan
Schaefer-LaRose also alleges violations of corresponding
New York state wage law, which provides outside sales and
administrative exemptions that are analogous to those
contained in the FLSA.
No. 10-3855, 11-1980 & 11-2131 3
neither administrative employees nor outside sales-
persons within the meaning of the statute and the De-
partment’s regulations.
After thorough consideration of the positions of
the parties, the view of the Department, the opinions of
our sister circuits and the facts in the records before us,
we conclude that, under the regulations of the Depart-
ment of Labor, the pharmaceutical sales representatives
are classified properly within the administrative exemp-
tion to the overtime requirements of the FLSA. Conse-
quently, we do not address the applicability of the out-
side sales exemption.2 We therefore affirm the judg-
ment of the district court in favor of Lilly in case num-
ber 10-3855 and reverse the judgment in favor of the
plaintiff class in cases 11-1980 and 11-2131 and remand
with instructions to enter judgment for Abbott.3
2
Indeed, this question is currently before the Supreme Court
in another case arising out of the pharmaceutical industry. See
Christopher v. SmithKline Beecham Corp., 635 F.3d 383 (9th Cir.
2011), cert. granted, 132 S. Ct. 760 (Nov. 28, 2011) (No. 11-204).
3
We therefore do not reach the issues in the plaintiffs’
cross-appeal in case numbers 11-1980 and 11-2131 concerning
willfulness.
4 Nos. 10-3855, 11-1980 & 11-2131
I
BACKGROUND
A. Facts 4
The defendants, Lilly and Abbott, are global companies
headquartered in Indiana and Illinois, respectively. They
research, manufacture, market and sell pharmaceuticals.
The plaintiffs are current and former employees.
To market their pharmaceuticals, Lilly and Abbott
employ the plaintiffs and others as “sales representatives,”
although the term carries a unique meaning in the
context of the pharmaceutical industry.5 The primary
task of a sales representative is to call upon physicians
and to persuade them to prescribe the pharmaceutical
products of the representative’s employer. Because of
the restrictions on pharmaceutical sales under federal
law and under medical ethics requirements, the sales
representatives actually do not sell any pharmaceuticals
to physicians, nor do the physicians upon whom they
4
Record citations in cases 11-1980 and 11-2131 are introduced
with the designation “Abbott R.” and refer to the record as
it existed in the district court. Record citations in case 10-3855
are introduced with the designation “Lilly R.” and refer to
the appellate docket court entries.
5
The plaintiffs in these two actions hold various titles and
earn or earned varying salaries. Ms. Schaefer-LaRose, for
instance, was a Senior Sales Representative, earning in excess
of $100,000 for almost all of her tenure with Lilly. Other
plaintiff representatives earned substantially less.
No. 10-3855, 11-1980 & 11-2131 5
call actually buy any pharmaceuticals. Instead, in this
tightly regulated industry, Lilly, Abbott and their fellow
pharmaceutical companies sell their pharmaceuticals
to wholesalers, retailers and other facilities such as hospi-
tals and nursing homes that are licensed to dispense
the pharmaceuticals in accordance with a physician’s
written prescription to the end-consumer, the patient.
In meeting with the physicians, the objective of the repre-
sentatives is to increase the number of prescriptions
that those physicians write for their employer’s prod-
ucts.6 An increase in prescriptions written results in an
increase in prescriptions filled by end-users and, conse-
quently, an increase in demand for the drug by the dis-
pensing entities from which end-users actually obtain
the drug. Sales representatives constitute a substantial
part of the workforce of large-scale pharmaceutical manu-
facturers; Lilly and Abbott currently employ thousands
nationwide.
Representatives spend the majority of their time pre-
paring for, making and documenting sales calls, with
the consistent goal of obtaining meaningful access to
the physicians and of influencing their preference for the
company’s products. The calls usually take place in
target physicians’ offices and may, in some cases, last
6
These encounters are termed “sales calls.” Although that
label is imprecise for these circumstances, we employ it for
ease of reading. We do note that these calls were once referred
to as “professional visitation,” Lilly R.43-9 at 177 (Schaefer-
LaRose dep. 185), but there is no material dispute about the
content or purpose of the visits.
6 Nos. 10-3855, 11-1980 & 11-2131
less than a minute. Some physicians refuse to receive
representatives from the pharmaceutical industry in
their offices, and, in those cases, sales representatives
have to find other ways to reach their target. They
might attend hospital presentations or sponsor their
own educational events where they hope to encounter
and to engage difficult-to-reach physicians. Each repre-
sentative also has a discretionary budget, the significance
of which is disputed in the records, to use on meal or
speaker programs or other events designed to reach a
particular target. In addition, the sales representatives
are allocated limited amounts of free pharmaceutical
product samples for distribution to physician offices.
These samples are a tool that the employers provide to
aid the representatives in gaining access to prescribers,
but the degree of discretion the representatives exercise
in the distribution of these samples is a matter of some
dispute. See, e.g., Abbott R.150-2 at 11 (Arri dep. 232)
(“I know it’s definitely my responsibility to manage
my samples.”); Lilly R.43-9 at 175 (Schaefer-LaRose
dep. 175) (acknowledging that the decision as to how
many samples to leave “was something that you had to
decide when you were in the physician’s office based
on your assessment of the circumstances”).7
7
The records also demonstrate that the representatives
were encouraged or instructed to provide the majority of the
samples to the highest-prescribing physicians to obtain the
best return on investment. See, e.g., Lilly R.43-17 at 28
(Schaefer-LaRose dep. 168); Lilly R.43-8 at 96 (Schaefer-LaRose
(continued...)
No. 10-3855, 11-1980 & 11-2131 7
Prior to visiting a particular physician, a representative
develops a pre-call plan. The details of these plans vary
widely. During the planning process, a representative
may review the physician’s prescribing practices, patient
population and similar information from data provided
by the pharmaceutical company or from notes taken by
the representative himself on previous visits. Using this
information, a representative evaluates whether prior
conversations with the physician have been effective
and determines whether any adjustments to his ap-
proach are necessary. The representative then identifies
a strategy for the call, which generally includes
identifying specific questions to use in order to engage
the physician in a conversation about the product and
selecting appropriate visual aids or literature to pique
the physician’s interest. See Lilly R.43-17 at 37 (Schaefer-
LaRose dep. 178) (describing the necessary planning
decisions and stating that “every representative under-
went [that process] before making a call”).
The representatives usually focus on a specific spe-
cialty—family practice, psychiatry or orthopaedics, for
instance. For a specific time frame, the company
would instruct them to approach the physicians in that
specialty and in their territory regarding a specific
7
(...continued)
dep. 174) (describing how a sales representative would have
to manage an allotment of samples and explaining that “[i]f
that means your highest prescribers get the majority of
samples, the lowest prescribers get none, that is the way it is”).
8 Nos. 10-3855, 11-1980 & 11-2131
product or range of products.8 During a sales call, sales
representatives use whatever time a physician is willing
to give them to speak about one or more of their em-
ployer’s drugs, including the drug’s benefits, its effective-
ness, its appropriateness for a given population and
similar information. In communicating these facts, the
sales force relies on carefully honed messages that origi-
nate with the pharmaceutical companies in order to
ensure compliance with relevant regulations and pre-
approvals by the federal Food and Drug Administration
(“FDA”). Because of these same concerns, all materials
regarding products that are made available publicly are
created centrally. Although the sales representatives
select which of their employer’s materials would best
be used for a specific call, they have no authority to
generate anything original.
The representatives are expected to engage the physi-
cians in conversation whenever possible. Although the
parties have suggested that there is a serious dispute
about the degree to which the representatives are
8
At any given time, a representative in a specialty field usually
was responsible for a limited number of products. See Abbott
R.150-3 at 13 (Giordano dep. 98) (describing her responsibilities
as typically involving two or three products at a given time);
Abbott R.150-2 at 45 (Benton dep. 223) (discussing incentive
compensation for three of the four primary care products
she was responsible for promoting in a given period); Lilly R.43-
17 at 28-29 (Schaefer-LaRose dep. 168-69) (stating that she
was responsible for four products during the last six months
of her employment).
No. 10-3855, 11-1980 & 11-2131 9
“scripted,” it became clear at oral argument that any
disagreement is mostly semantic. Core messages must
be delivered precisely to ensure compliance with ap-
plicable laws and to represent accurately the science of
a particular product. Nevertheless, the calls do not
follow a predictable course. For example, sales repre-
sentatives are encouraged to employ sales techniques
that tailor the company’s core messages most success-
fully to each physician’s schedule, preferences and pa-
tient population. Sales representatives must be attentive
to the circumstances and responsive to a particular physi-
cian’s substantive areas of interest or concern.9 Accord-
9
“Do we need to uncover their needs and understand what
they’re looking for in their specific practices . . ., absolutely, and
that’s why we were trained so well to ask specific questions
that would evoke a specific response.” Abbott R.150-3 at 14
(Giordano dep. 146-47); see also Abbott R.150-2 at 57 (Bodie
dep. 173) (noting that she tailored her presentations upon
learning “what the doctors like to see or what kind of
questions they have”); id. at 67 (Boyer dep. 114-17) (describing
decisions that he would have to make during the course of a
call, including how he would change his pre-planned approach
to discuss efficacy, for instance, if he learned that the doctor’s
main concern was, instead, side effects); Lilly R.43-15 at 21
(Schaefer-LaRose dep. 179) (acknowledging that the purpose
of a pre-call plan was “to better understand the needs of the
individual physician before you went in to talk to that person”);
id. at 22-23 (Schaefer-LaRose dep. 181-82) (stating that sales
representatives were trained to ask open-ended questions
because “physicians would open up about their experiences and
(continued...)
10 Nos. 10-3855, 11-1980 & 11-2131
ingly, they are required to answer the questions posed
by the physicians in a manner consistent with the em-
ployer’s approved messages. Physicians might even ask
about various other products made by the respective
employer and, if the representative is competent to
answer—that is, if the particular drug is within his ex-
pertise—the physician’s question could redirect entirely
the conversation away from the initial plan. In sum, the
nature of the industry requires that the representa-
tives work within tightly controlled central mes-
sages; nevertheless, the representatives’ ability to be
responsive to physicians’ needs requires significant
discretion in the manner and mode of the delivery of that
message and in the details emphasized. These elements,
crucial to the success of the particular call, are also
unique to each call. See, e.g., Abbott R.150-2 at 84 (Brown
dep. 105) (“[E]very office is different, every provider
is different, every scenario is different, so as much as
we were taught cookie cutter, this is how you’re
supposed to do it, you had to modify it based on who-
ever it was you were in front of . . . .”).1 0
9
(...continued)
their expectations and their needs,” and explaining that such
answers would help the sales representatives “gain more
information about their practice and their patients, and the
placing of [the Lilly] product in the practice”).
10
Ms. Schaefer-LaRose noted that Lilly had specific rules as
to what constituted a call and that, if she only had a limited
amount of time with a particular physician, she would be sure
(continued...)
No. 10-3855, 11-1980 & 11-2131 11
At the conclusion of individual calls, sales representa-
tives attempt to secure business for their employers
from the physician. The records disclose that, once
a representative is satisfied with the content of a
particular call, he “earn[s] the right to close th[e] sale” by
asking the physician to commit verbally—although in
a completely non-binding way—to prescribe the com-
pany’s products where appropriate.1 1 Abbott R.150-6 at
10
(...continued)
to provide “the name of the product, the dosage, the frequency
and the indication” in order to receive credit for the call. See
Lilly R.43-9 at 159-60 (Schaefer-LaRose dep. 130-31). However,
she explained that, depending on the circumstances sur-
rounding the call, she would focus her message on
different factors, taking into consideration the physician’s
availability and mood, the product she was promoting, and
how much time she had to make her pitch. See id. at 160-61
(Schaefer-LaRose dep. at 131-32).
11
Ms. Schaefer-LaRose described how she was “trained to ask
for the business during every call.” Lilly R.43-15 at 19
(Schaefer-LaRose dep. 177). This meant “ask[ing] the
physician to commit to prescribe the product in the appropriate
circumstance[s],” or “asking the physician to try . . . the
product with a patient who met the description of the patient
that [she] had been told to set up on the first page of the
detail piece.” Id. Lilly trained its representatives to try to get
a “chip” during each call, which Ms. Schaefer-LaRose
described as a positive piece of information from the
physician about Lilly’s product. Id. at 23-24 (Schaefer-LaRose
dep. 182-83). The representatives were taught to then use
(continued...)
12 Nos. 10-3855, 11-1980 & 11-2131
25 (Rogers dep. 65). Although some representatives
apparently do not ask for the commitment, or prefer to
ask with somewhat of a softer touch, the companies
instruct the representatives to ask for the physician’s
commitment with every visit.
Sales representatives attempt to develop continuing
relationships with the physicians to whom they are
assigned and to create an ongoing, positive impression of
themselves, their products and their employer. 1 2 In their
11
(...continued)
that piece of information in order to obtain a commitment
from the physician to prescribe Lilly’s pharmaceuticals.
12
See, e.g., Lilly R.43-8 at 108-09 (Schaefer-LaRose dep. 248-49)
(explaining that the representatives served as “the primary
contact between those physicians and Lilly”); Abbott R.150-3
at 28 (Jirak dep. 91) (noting that he “tried to develop business
relationships with the doctors in order to get time with
them” and that he would take care to ensure that his actions
would not lead them to “have a negative opinion of people
that work for Abbott”); Abbott R.150-2 at 85 (Brown dep. 108)
(“[Y]ou had to understand where you were going, who you
were dealing with and have enough business acumen to be
able to present yourself, your company, your products in a
way that would make you hopefully memorable in a positive
fashion.”); Abbott R.150-3 at 16 (Giordano dep. 180) (noting
that, in looking at call histories, she would “identify where
a doctor was in the selling cycle and then gear [her] presenta-
tion . . . based on where they were in that continuum of buy-
in”); Abbott R.150-2 at 51 (Bodie dep. 60) (describing how she
would review prior notes and focus her attention on the physi-
(continued...)
No. 10-3855, 11-1980 & 11-2131 13
depositions, the representatives spoke about how “over
time” they learned a particular physician’s preferences
including the methods and types of information to
which he responded in a positive manner.1 3
Sales representatives generally structure their days
independently and work alone. There is some dispute
in the records about the degree of control exercised by
the employers over the identity of the physicians visited
and the frequency of those visits. It is clear, however,
that there is, at minimum, significant direction about
the number of visits that should be conducted over a
quarter. The employer identifies the physicians as high-
prescribing or low-prescribing with respect to the em-
ployer’s products and assigns a numerical or frequency
12
(...continued)
cian’s prior concerns to “reinforce what we talked about or
answer any questions that he had given me the last time”);
Abbott R.146-4 at 8-9 (Guerrera dep. 85-86) (referencing
“building a relationship” with a call-plan physician as a goal);
Lilly R.43-15 at 21 (Schaefer-LaRose dep. 179) (explaining that
a representative would use a post-call plan “to set up the
next call based upon what you learned in the current call”).
13
E.g., Abbott R.150-3 at 5 (Cheryl Fuller dep. 46); accord
Abbott R.150-2 at 87 (Brown dep. 125) (describing a “sales call
continuum,” of which the prior work of other team members
was a part). At any given time, representatives might be
assigned between 30 and 200 or more physicians to call on,
with varying frequencies. See, e.g., Abbott R.150-2 at 5 (Arri
dep. 106); Abbott R.146-10 at 7 (Chao dep. 96); Lilly R.43-17 at
6 (Schaefer-LaRose dep. 70).
14 Nos. 10-3855, 11-1980 & 11-2131
goal regarding visits to that physician by an individual
representative or by the team in a certain region. Using
this data, the representatives compose a work plan and
secure the approval of management. See, e.g., Lilly R.43-17
at 4-5 (Schaefer-LaRose dep. 67-68). The representatives
apparently retain some degree of flexibility to respond to
conditions in the field, that is, to increase or decrease
visits or reach out to additional physicians or others in
their offices based on their strategic perceptions.1 4 At
14
See Abbott R.146-2 at 18-19 (Rancourt dep. 80-81) (describing
the call plan and modification process as well as the im-
portance of a representative’s judgment in setting a schedule);
Abbott R.150-6 at 99 (Paul Fuller decl. 2) (stating that he
spends fifty percent of his time visiting non-physician
medical office staff and that, because Abbott provides no
direction regarding the frequency of such visits, he “us[es] [his]
personal knowledge of the territory” to set that schedule);
Abbott R.150-7 at 31 (Miller decl. 2) (stating that he “receive[s]
a call plan from Abbott” identifying “the suggested frequency”
of visits to individual physicians, but that it “is not always
an accurate reflection of [his] territory” and he “must use [his]
own knowledge and experience” to modify the plan, add or
drop physicians, etc.); id. at 26 (Hettenback decl. 3) (noting
that he is authorized to modify the plan both before and
after finalization, and that, after finalization, he “diverge[s]
from the call plan about 10-15% of the time”); Abbott R.150-6 at
102 (Paul Fuller decl. 5) (“I can (and do) deviate from [the call
plan] if I feel my sales efforts would be better concentrated
elsewhere. Basically, I do what I think is right for the business.”);
Abbott R.146-10 at 8-9 (Chao dep. 97, 100) (describing a sales
(continued...)
No. 10-3855, 11-1980 & 11-2131 15
Abbott, for instance, representatives set a plan for
each quarter and are required to complete seventy-five
percent of the listed tasks. Abbott R.163-3 at 110 (Putnam
dep. 70); id. at 224 (Rancourt dep. 91). At Lilly, representa-
tives develop specific routing plans, which “ha[ve] to
absolutely be followed to meet the frequency require-
ments.” Lilly R.43-17 at 10 (Schaefer-LaRose dep. 76); id.
at 12-14 (Schaefer-LaRose dep. 94-96) (discussing
routing plans); see also Lilly R.43-8 at 106 (Schaefer-
LaRose dep. 228) (noting that she was expected to make
nine calls a day).
Representatives in a given territory, however, do work
collaboratively in a number of ways. They meet to
develop territory-wide plans (also subject to manage-
ment approval), coordinate physician messages, share
information, and determine an effective, non-repetitive
14
(...continued)
representative’s own authority to see “extra doctors,” although
stating that he could not “subtract” physicians from the list);
Lilly R.43-9 at 170 (Schaefer-LaRose dep. 152) (acknowledging
that, at Lilly, if a particular sales representative was per-
forming poorly, “[y]ou would change your behaviors im-
mediately,” to include “try[ing] to up your [call] frequency”).
But see Abbott R.146-8 at 5-6 (Hurley dep. 105-06) (stating that
she could be penalized for responding to a request for samples
from a non-call-plan physician without approval from her
manager first); Abbott R.146-4 at 8 (Guerrera dep. 85) (stating
that she could meet with plan doctors only and could not “meet
a [non-plan] nephrologist at, you know, at the mall and add
them to [her] call plan”).
16 Nos. 10-3855, 11-1980 & 11-2131
visit schedule with physicians.1 5 In fact, beginning in 1998,
Lilly established “coordinat[ion of] efforts with territory
partners in a team environment” as one of the overall
objectives for its representatives. See Lilly R.43-9 at 201-
02 (Schaefer-LaRose dep. 256-57). In keeping with
this objective, sales representatives often work with a
partner. Partners within a territory confer regarding
the development of routing plans, as well as how to
allocate funds for peer-to-peer programs. In addition,
15
E.g., Abbott R.150-3 at 7 (Cheryl Fuller dep. 82-85); see also
Abbott R.150-2 at 51 (Bodie dep. 59-60) (discussing the
physician-specific notes that could be accessed by different
representatives to coordinate visits and messages); id. at
70 (Boyer dep. 154-57) (discussing a team-designed method of
information-sharing); id. at 84 (Brown dep. 105) (stating that
representatives “would be on the phone [with each other]
all day talking about doctors”); Abbott R.150-3 at 13 (Giordano
dep. 99) (stating that it would be “redundant” to review other
representatives’ old call notes because they “were also commu-
nicating with each other like daily, every other day, talking
about what was taking place”); id. at 15 (Giordano dep. 172-73)
(discussing the “business plan” for the team or “pod” and the
method by which it was constructed); Lilly R.43-8 at 66
(Schaefer-LaRose dep. 49) (stating that representatives “were
in near constant telephone contact” and “often spoke on the
telephone during the evening hours to help and support each
other”); Lilly R.43-9 at 176 (Schaefer-LaRose dep. 180) (ex-
plaining that post-call plans could be used to inform
partners about “something very important that happened”
or “[s]ome huge piece of information that needed to be
followed up on”).
No. 10-3855, 11-1980 & 11-2131 17
representatives who run out of samples are able to
call their partners to see if they have any additional
samples to distribute. Representatives who are short on
discretionary funds to host an educational event might
suggest a partnership, such that some portion of the
food or facilities costs came from another representa-
tive’s allocation.
Except for occasional ride-alongs by a supervisor, the
sales representatives are without direct supervision
while doing their most significant task—meeting with
physicians. However, sales representatives do have
regular contact with supervisors through periodic check-
ins and in regular conference calls, meetings and training
sessions.
Sales representatives receive extensive training, both
substantive and skills-based. They are trained and tested
on diseases, product details and products manufactured
by their competitors. See Abbott R.150-3 at 23 (Jirak
dep. 53) (describing roughly three months of near-continu-
ous training at Abbott’s headquarters as “ex-
tremely thorough, very long”); Lilly R.43-9 at 156, 166-67
(Schaefer-LaRose dep. 123, 140-41) (describing the initial
classroom instruction and periodic follow-up training
sessions); id. at 161-64 (Schaefer-LaRose dep. 132-35)
(describing the process for learning disease states).1 6 They
16
Indeed, Ms. Schaefer-LaRose described herself as a “scientist,”
rather than a salesperson, because she was charged with
“convey[ing] scientific information to physicians about how
(continued...)
18 Nos. 10-3855, 11-1980 & 11-2131
also receive significant “sales” training that teaches,
through role-play and various other tools, techniques for
persuading physicians and for “closing” the sale.
Sales representatives historically have been classified
throughout the pharmaceutical industry as exempt em-
ployees under the FLSA and related state statutes. At
both Lilly and Abbott, the representatives work for a
base salary plus incentive pay; the latter is based on
total sales in the representative’s territory. Although the
incentive pay provides a monetary reward for the repre-
sentatives, they do not receive direct “commissions” based
on physician commitments made to them or on prescrip-
tions simply written by the physicians; the companies
make incentive decisions based on prescriptions actually
filled and purchased. Prescriptions written but never
filled do not influence the incentive decision.
B. Procedural Histories
1. No. 10-3855
Susan Schaefer-LaRose originally filed this action on
November 14, 2006, in the Northern District of New
York. Lilly moved to transfer the case to the Southern
District of Indiana under 28 U.S.C. § 1404(a), and, after
transfer was granted, moved for summary judgment. The
district court granted Lilly’s motion for summary judg-
16
(...continued)
and why [Lilly’s] product is beneficial to patients.” Lilly R.43-9
at 177 (Schaefer-LaRose dep. 185).
No. 10-3855, 11-1980 & 11-2131 19
ment; it concluded that the position of pharmaceutical
sales representative was within both the outside sales
exemption and the administrative exemption to the FLSA.
Beginning with the outside sales exemption, the
district court took a pragmatic approach, emphasizing
the structure and realities of the pharmaceutical indus-
try. Specifically, the court acknowledged that “[o]nly
the nature of the heavily regulated pharmaceu-
tical industry prevented Ms. Schaefer-LaRose from going
beyond receiving non-binding commitments from the
physicians on whom she made calls in her sales territory
to consummating final sales to them.” Schaefer-LaRose v. Eli
Lilly & Co., 663 F. Supp. 2d 674, 686 (S.D. Ind. 2009) (em-
phasis added). The court pointed to the “undisputed
fact” that “Ms. Schaefer-LaRose was clearly hired as a
Lilly sales representative, not simply to educate and
inform physicians about Lilly pharmaceuticals, but to
generate sales of those products.” Id.
The district court rejected Ms. Schaefer-LaRose’s argu-
ment that her work was not within the outside sales
exemption because she actually did not consummate
sales, but rather engaged in promotion work which
resulted in sales made by a third party. The court distin-
guished Ms. Schaefer-LaRose’s work from traditional
promotion work, explaining that she “did not merely
‘grease the skids’ in preparing the way for a second wave
of Lilly employees who later would visit those same
physicians and close the actual sales.” Id. at 687. Rather,
“when her efforts succeeded later on in terms of the
issuance of a prescription by a physician to a patient
20 Nos. 10-3855, 11-1980 & 11-2131
who purchases the medication, Ms. Schaefer[-]LaRose
personally received salary benefits for those prescrip-
tions as part of her compensation package.” Id.
Taking note of the indicia-of-sales factors in the reg-
ulations, the court concluded that all of Ms. Schaefer-
LaRose’s ancillary duties, which included preparing
and reviewing reports, distributing drug samples to
physicians, and allocating funds for programs, were in
direct support of her sales efforts to secure commit-
ments from physicians to prescribe Lilly pharmaceuticals.
Additionally, the court noted that Ms. Schaefer-LaRose
was compensated, in large part, based upon the number
of prescriptions written within her territory. The court
therefore concluded that sales representatives indeed
make “sale[s]” within the meaning of section 3(k) of the
FLSA, 29 U.S.C. § 203(k).
The court then turned to whether, as a pharmaceutical
sales representative, Ms. Schaefer-LaRose qualified as an
exempt administrative employee. After setting forth the
three-pronged test of the regulation, the court focused
on the second prong: whether the employee engages in
office or non-manual work directly related to manage-
ment or general business operations. Once again
adopting a pragmatic approach, the court concluded
that Ms. Schaefer-LaRose’s marketing and promotion
work was clearly distinct from the company’s produc-
tion of pharmaceuticals, and, as such, satisfied the re-
quirement raised by the production/administration dis-
tinction described in 29 C.F.R. § 541.201(a). The court
then rejected Ms. Schaefer-LaRose’s argument that,
No. 10-3855, 11-1980 & 11-2131 21
because her work was focused on a limited group of
doctors, it was not directly related to the management
or general business operations of the company. The
court pointed out that “[t]he success of Lilly’s business
depends in significant part on whether consumers pur-
chase pharmaceuticals produced by Lilly,” and therefore
the success of its sales representatives is critical to Lilly’s
business. Schaefer-LaRose, 663 F. Supp. 2d at 690. The
court therefore concluded that, due to the nature of
the business, “the activities of each individual sales
representative have a substantial impact on Lilly’s
business operations and bottom line.” Id. at 691.
Having determined that Ms. Schaefer-LaRose satisfied
the second prong of the administrative employee test,
the court turned to the third prong of that exemp-
tion: whether the employee exercises discretion and
independent judgment with respect to matters of sig-
nificance. The court rejected Ms. Schaefer-LaRose’s char-
acterization of the record as “demonstrat[ing] that she
had very little latitude in her job, that she was rigorously
trained, closely monitored and supervised, and was
subject to strict oversight and control in the performance
of her duties.” Id. at 691-92 (internal quotation marks
omitted). In reaching its conclusion that Ms. Schaefer-
LaRose “exercised considerable discretion and independ-
ent judgment as part of her daily work for Lilly,” the
court noted that Ms. Schaefer-LaRose tailored each pre-
sentation to the specific physician, analyzed reports
to evaluate her success, decided which drugs and
how many to leave with each physician, and determined
the most effective allocation of the meals budget. Id. at 693-
22 Nos. 10-3855, 11-1980 & 11-2131
94. Finally, the court explained that this exercise of dis-
cretion clearly was aimed at increasing the number of
Lilly prescriptions written in her territory—“a matter
of considerable significance to Lilly to say the least.” Id.
at 694. Accordingly, the district court granted Lilly’s
motion for summary judgment.
Ms. Schaefer-LaRose sought reconsideration, which
was denied on September 30, 2010. A final judgment
was entered on November 12, 2010, under Federal Rule
of Civil Procedure 54(b).1 7
2. Nos. 11-1980 & 11-2131
James Jirak and Robert Pedersen brought this action
in the Northern District of Illinois, and the district court
conditionally certified a class. After 297 plaintiffs opted
in, the district court ruled that only 78 plaintiffs had
claims within the three-year limitations period.
Abbott filed a motion for summary judgment against
named plaintiffs Mr. Pedersen and Mr. Jirak, noting the
absence of a final class certification order. The plain-
tiffs cross-moved for summary judgment. The district
court granted the motion on liability for the plain-
17
In addition to Ms. Schaefer-LaRose, there are approximately
388 opt-in plaintiffs, as part of a conditionally certified
collective action, all of whom share the same FLSA claims. The
claims of the opt-in plaintiffs remain pending before the
district court as the case has been stayed by the district court’s
November 12, 2010 order, pending this appeal.
No. 10-3855, 11-1980 & 11-2131 23
tiffs. Jirak v. Abbott Labs., Inc., 716 F. Supp. 2d 740 (N.D.
Ill. 2010).
In analyzing the problem before it, the district court
relied heavily on an amicus brief filed by the DOL before
the Second Circuit in In re Novartis Wage & Hour Litiga-
tion, 611 F.3d 141 (2d Cir. 2010). In that brief, the
Secretary of Labor argued that pharmaceutical sales
representatives do not make “sale[s]” within the
meaning of section 3(k) of the FLSA, 29 U.S.C. § 203(k).
The Secretary noted that, although the work of the repre-
sentatives bears some indicia of sales, the representa-
tives neither sell nor take orders. Instead, “ ‘they provide
information to target physicians about [the company’s]
drugs with the goal of persuading the physicians to
prescribe those drugs to their patients.’ ” Jirak, 716 F. Supp.
2d at 745 (quoting the Secretary’s Novartis amicus
brief). Because the most that the representatives achieve
from a given “sales” call is “ ‘a non-binding commitment
to prescribe . . . when appropriate,’ they ‘do not meet
the regulation’s plain and unmistakable requirement
that their primary duty must be “’making sales.” ’ ” Id.
(quoting the Secretary’s Novartis amicus brief). The Secre-
tary viewed the representatives in Novartis as engaged
in non-exempt promotional work, designed to stimulate
sales generally or sales that would be consummated by
others.
Accepting the plaintiffs’ argument that the Secretary’s
view was owed deference under Auer v. Robbins, 519
U.S. 452 (1997), the court found the Secretary’s position
“both persuasive and consistent” with its own view of
24 Nos. 10-3855, 11-1980 & 11-2131
the regulation and agreed that the “sales” work done
by the representatives was described more accurately
as “promotion[]” work. Jirak, 716 F. Supp. 2d at 747.
The court explicitly noted its disagreement with the
decision of the district court in Schaefer-LaRose, 663
F. Supp. 2d 674. It rejected the view that the work of
the sales representatives “represented a special category
with regard to ‘making sales,’ ” and further noted
that courts must construe narrowly the exemptions to
include those “plainly and unmistakably” within the
statutory and regulatory framework. Jirak, 716 F. Supp. 2d
at 748 (quotation marks omitted).
The district court then turned to the administrative
exemption. It noted each of the regulatory requirements
for the exemption, and then turned first to the third
prong: whether the employees exercise discretion with
respect to matters of significance. The court found
that the employees principally applied sales skills to
Abbott’s established techniques and procedures rather
than exercising discretion. Although noting that they
h a d fle x ib ility to d eterm in e how to d eliv e r
Abbott’s message, they “were not ‘free from immediate
direction.’ ” 18 Id. at 750 (quoting 29 C.F.R. § 541.202(c)).
Again, the district court turned to the DOL’s Novartis
brief, which stated that the discretion exercised by the
representatives in that case was insufficient to warrant
the administrative exemption. Although not explicitly
stating that it was deferring to the agency, the court
18
The court provided no record citation for this fact.
No. 10-3855, 11-1980 & 11-2131 25
found its analysis “consistent with previous agency
decisions.” Id. at 751. Accordingly, the court entered
summary judgment on liability for the plaintiffs.
Prior to the damages trial, Abbott filed a “Motion
for Judgment as to Willfulness,” contending that any
FLSA classification error had not been shown to be
willful. Abbott R.208. The district court agreed. It found
that Abbott’s interpretation of the FLSA was reasonable
and that no evidence demonstrated that Abbott inten-
tionally had misclassified the employees to avoid
overtime liability. Because the statute of limitations for
non-willful violations of the FLSA is two, not three
years, see 29 U.S.C. § 255(a), the court’s order reduced
the number of eligible plaintiffs by nineteen. The parties
stipulated to damages in the amount of $3.5 million,
and judgment was entered for the remaining fifty-
seven eligible plaintiffs.
II
ANALYSIS
A. Standard of Review
We review a district court’s entry of summary judgment
de novo, taking the facts and all reasonable inferences
in favor of the nonmoving party.1 9 Musch v. Domtar Indus.,
19
The district court had jurisdiction over the FLSA claims
under 29 U.S.C. § 216(b) and 28 U.S.C. § 1331. It had jurisdiction
over the state law claims under 28 U.S.C. § 1367(a). We have
jurisdiction under 28 U.S.C. § 1291.
(continued...)
26 Nos. 10-3855, 11-1980 & 11-2131
Inc., 587 F.3d 857, 859 (7th Cir. 2009). The burden is on
the employer to establish that an employee is covered
by the exemption. Corning Glass Works v. Brennan, 417
U.S. 188, 196-97 (1974). As a remedial statute, the exemp-
tions are narrowly drawn against the employers, Johnson
v. Hix Wrecker Serv., Inc., 651 F.3d 658, 660 (7th Cir.
2011), and “limited to those establishments plainly and
unmistakably within their terms and spirit,” Arnold v.
Ben Kanowsky, Inc., 361 U.S. 388, 392 (1960). This
approach ensures that we remain faithful to the plain
wording of the statutory language as a whole and, conse-
quently, to the intent of Congress. Yi v. Sterling Collision
Ctrs., Inc., 480 F.3d 505, 508 (7th Cir. 2007).
B. The FLSA and Accompanying Department of
Labor Regulations
Under the FLSA, employees are entitled to overtime
pay (i.e., one and one-half times the regular rate) for
any hours worked in excess of forty hours per week,
19
(...continued)
As we have noted, these cases were resolved by the district
courts in different ways, with one court ruling for the
plaintiff class and against Abbott, and one court ruling
against Ms. Schaefer-LaRose and for Lilly. We are obligated
to view the facts of each case in the light most favorable to
the party challenging summary judgment in each. We have
no significant difficulty in applying that rule here because
we conclude that the factual disputes in these records are
insignificant and, therefore, are not material to the outcome
of either case.
No. 10-3855, 11-1980 & 11-2131 27
unless they come within one of the various exemptions
set forth in the Act. 29 U.S.C. §§ 207, 213. Under the stat-
ute’s express delegation of rule-making authority, the
Secretary has issued, after notice-and-comment proce-
dures, detailed regulations that define each of the ex-
emptions in § 213(a)(1). See 29 U.S.C. § 213(a)(1) (providing
authority); Defining and Delimiting the Exemptions
for Executive, Administrative, Professional, Outside Sales
and Computer Employees, 69 Fed. Reg. 22,122, 22,124 (Apr.
23, 2004) (acknowledging that the regulations were
issued pursuant to statutory authority); see also Long
Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 165-68
(2007) (explaining the statutory and regulatory scheme);
Haywood v. N. Am. Van Lines, Inc., 121 F.3d 1066, 1069 (7th
Cir. 1997) (discussing the regulations as having “the force
and effect of law” (quotation marks omitted)).
Among those exemptions is one that exempts from the
overtime requirement of § 207 “any employee employed in
a bona fide executive, administrative, or professional
capacity.” 29 U.S.C. § 213(a)(1). With regard to the adminis-
trative exemption, the Secretary has promulgated the
following regulations:
(a) The term “employee employed in a bona fide
administrative capacity” in section 13(a)(1) of the
Act shall mean any employee:
(1) Compensated on a salary or fee basis at
a rate of not less than $455 per week (or
$380 per week, if employed in American
Samoa by employers other than the Federal
Government), exclusive of board, lodging
or other facilities;
28 Nos. 10-3855, 11-1980 & 11-2131
(2) Whose primary duty is the performance
of office or non-manual work directly
related to the management or general
business operations of the employer or the
employer’s customers; and
(3) Whose primary duty includes the exer-
cise of discretion and independent judg-
ment with respect to matters of signifi-
cance.
29 C.F.R. § 541.200(a).
In applying this regulation,2 0 our evaluation of the
present FLSA claim, as in all such claims, requires a
thorough, fact-intensive analysis of the employee’s em-
ployment duties and responsibilities. See Roe-Midgett v.
CC Servs., Inc., 512 F.3d 865, 870 (7th Cir. 2008).
20
The parties address extensively the degree of deference
owed to the Secretary’s position. Most of this argument ad-
dresses the appropriate deference owed to the Secretary’s
interpretation of an ambiguous regulation. Cf. Christensen v.
Harris Cnty., 529 U.S. 576, 588 (2000) (declining to defer to an
agency’s interpretation, contained in an opinion letter, of an
unambiguous regulation); Auer v. Robbins, 519 U.S. 452, 461-62
(1997) (deferring to an agency’s interpretation of its own
regulation stated in an amicus brief). Although this question
might deserve significant attention if an interpretation of
the regulations were in question, as it perhaps is with respect
to the outside sales exemption, it does not apply here. In
this case, we are simply tasked with the application of an
unambiguous regulation to the particular facts.
No. 10-3855, 11-1980 & 11-2131 29
With respect to the first prong, the parties agree, and the
records are clear, that the sales representatives were
compensated on a salary basis that qualifies them for
the administrative employee exemption. Accordingly,
the two “duties” requirements set forth in the second
and third prong of the regulation are the focus of this
appeal. We now turn to an analysis of each.
1. Work “Directly Related” to “Management or Gen-
eral Business Operations”
The second prong of the test for the applicability of the
administrative exemption requires that the qualifying
employee’s “primary duty [must be] the performance
of office or non-manual work directly related to
the management or general business operations of the
employer or the employer’s customers.” 29 C.F.R.
§ 541.200(a)(2). The regulations provide further guidance
with respect to this point:
(a) To qualify for the administrative exemption, an
employee’s primary duty must be the performance
of work directly related to the management or
general business operations of the employer or
the employer’s customers. The phrase “directly
related to the management or general business
operations” refers to the type of work performed
by the employee. To meet this requirement, an em-
ployee must perform work directly related to assisting
with the running or servicing of the business, as distin-
guished, for example, from working on a manufacturing
30 Nos. 10-3855, 11-1980 & 11-2131
production line or selling a product in a retail or service
establishment.
(b) Work directly related to management or
general business operations includes, but is not
limited to, work in functional areas such as tax;
finance; accounting; budgeting; auditing; insur-
ance; quality control; purchasing; procurement;
advertising; marketing; research; safety and health;
personnel management; human resources; em-
ployee benefits; labor relations; public relations,
government relations; computer network, internet
and database administration; legal and regulatory
compliance; and similar activities. Some of these
activities may be performed by employees who
also would qualify for another exemption.
(c) An employee may qualify for the administrative
exemption if the employee’s primary duty is the
performance of work directly related to the man-
agement or general business operations of the
employer’s customers. Thus, for example, employ-
ees acting as advisers or consultants to their em-
ployer’s clients or customers (as tax experts or
financial consultants, for example) may be exempt.
Id. § 541.201 (emphasis added).
The plaintiffs submit that, as sales representatives, their
day-to-day responsibilities do not include work that
would constitute “running or servicing . . . the business”
No. 10-3855, 11-1980 & 11-2131 31
within the meaning of 29 C.F.R. § 541.201(a).2 1 In their
view, the work that they perform for Lilly and Abbott,
promotional and sales-like work focused on a limited,
select group of physicians, does not qualify for the ad-
ministrative exemption. The plaintiffs elaborate on
this argument by contending that the exemption was
designed for “higher level employees” whose work is
targeted at sales, promotional and marketing policies of
the company overall. Schaefer-LaRose Br. 47; accord
Abbott Appellees’/Cross-Appellants’ Br. 72. Finally,
the plaintiffs argue that cases that have applied the ex-
emption in other courts have involved employees who
possessed greater authority with respect to strategic
design, proposal writing, supervision or similar sig-
nificant responsibilities.
We cannot accept the plaintiffs’ view. We begin with
the language of the regulations. Specifically, the regula-
tions distinguish between the type of work that involves
“the running or servicing of the business,” and work
such as laboring “on a manufacturing production line
or selling a product in a retail or service establishment.”
29 C.F.R. § 541.201(a). That is, when an employee is
engaged in the core function of a business, his or her
task is not properly categorized as administrative. See
Haywood, 121 F.3d at 1072 (quoting Martin v. Cooper Electric
21
The Secretary does not address this issue in her amicus
brief. Instead, in considering the administrative exemption, she
relies only on the ground that Ms. Schaefer-LaRose did not
satisfy the discretion and independent judgment prong.
32 Nos. 10-3855, 11-1980 & 11-2131
Supply Co., 940 F.2d 896, 904-05 (3d Cir. 1991), for the
proposition that “ ‘[s]ervicing’ a business within the
meaning of [the former regulation] denotes employment
activity ancillary to an employer’s principal production
activity”). As the district court in Schaefer-LaRose noted,
the core function of the drug makers here is the develop-
ment and production of pharmaceutical products. The
plaintiffs’ work supports that function, but is distinct
from it.22
Furthermore, in the preamble to the current regula-
tions, the Department of Labor reaffirms the view it has
22
In Martin v. Cooper Electric Supply Co., 940 F.2d 896, 903 (3d
Cir. 1991), the Third Circuit applied the “administrative/
productive work dichotomy” under the former regulations to
reach the conclusion that sales professionals at a wholesaler
could not be classified as administrative employees. The
only business of the wholesaler was sales. It neither produced
its products nor provided services as its principal business
activity. Accordingly, those responsible for the sales were
engaged in the only production relevant to the employer’s
business.
The Department of Labor since has modified the regulations
with the intent “to reduce the emphasis on” the dichotomy
described in Martin. See Defining and Delimiting the Exemptions
for Executive, Administrative, Professional, Outside Sales
and Computer Employees, 69 Fed. Reg. 22,122, 22,140 (Apr. 23,
2004) (quotation marks omitted). Although the distinction is
not determinative unless an employee is engaged unequivocally
in production, it remains “one analytical tool that should be
used toward answering the ultimate question.” Id. at 22,141
(internal quotation marks omitted).
No. 10-3855, 11-1980 & 11-2131 33
held for more than sixty years that “the administrative
operations of the business include the work of employees
servicing the business, such as, for example, advising
the management, planning, negotiating, representing the
company, purchasing, promoting sales, and business
research and control.” 69 Fed. Reg. at 22,138 (emphasis
added) (internal quotation marks omitted); see also id.
(noting that “exempt administrative work includes not
only those who participate in the formulation of manage-
ment policies or in the operation of the business as a
whole, but it also includes a wide variety of persons
who either carry out major assignments in conducting
the operations of the business, or whose work affects
business operations to a substantial degree, even though
their assignments are tasks related to the operation of a
particular segment of the business” (internal quotation
marks omitted)). The current regulations themselves
provide an illustrative list of “functional areas” or depart-
ments from which employees frequently qualify for
the administrative exemption; that list includes such
areas as advertising, marketing and public relations.
29 C.F.R. § 541.201(b). Although none is a perfect de-
scription of the work of the representatives here,
they are sufficiently similar to suggest that the repre-
sentatives’ work is directly related to the general
business operations of the pharmaceutical companies.2 3
23
We note in passing the plaintiffs’ argument that the
Second Circuit’s decision in Reisick v. Universal Communications
of Miami, Inc., 591 F.3d 101 (2d Cir. 2010), requires an opposite
(continued...)
34 Nos. 10-3855, 11-1980 & 11-2131
23
(...continued)
result. Reisick concludes that an individual salesperson who is
focused on individual sales does not qualify for the exemption.
Its reasoning is not applicable to the particular jobs at issue
here in this particular industry. Id. at 107. In Reisick, the court
considered the position of someone selling advertising space
in a free magazine. The Second Circuit began by noting that
the publisher was not operating one of the archetypal
businesses envisioned by the FLSA, but that, by analogy to
those archetypes, the employee in question was involved in
routine individual sales. Specifically, the magazine’s ad-
vertising space—the only revenue-generator the company
had—was its “product,” and the employee in question sold it.
Id. at 106 (quotation marks omitted). The court then distin-
guished the employee’s direct sales work with work
that would encourage sales more generally. Here, the pharma-
ceutical company defendants produce actual pharmaceutical
products, which the plaintiffs promote to physicians. Indeed,
the plaintiffs have gone to great pains to explain that they
do not sell to any individuals, although they engage in
targeted promotion efforts. They emphasize that they are not
credited with sales, even when data shows physicians they
target begin using a product they promote with greater fre-
quency. They receive bonuses based on consumer sales in
their region without any of those sales being attributable to
them. Although plaintiffs’ efforts are targeted, simply
analogizing them to sales is unconvincing. Not only are
the circumstances of pharmaceutical work somewhat unusual,
as far as sales and marketing go, but the plaintiffs strenuously
distinguish their work from “sales” in the context of the
outside sales exemption that we have declined to address.
(continued...)
No. 10-3855, 11-1980 & 11-2131 35
The representatives here are the principal ongoing rep-
resentatives of the company to the professional commu-
nity that is in a unique position to make, or deny, a viable
market for the company’s product. They do not make
individual sales of medications, but ensure, on a con-
tinuing basis, that the medical community is fully
aware of the potential of the company’s pharmaceutical
products and that the same community is confident that
the company’s products will be effective tools in the
practical setting of a medical practice. Moreover, the
representatives are one of the principal, and perhaps
the main, conduit by which physicians provide
meaningful feedback to the company on the actual ef-
fectiveness, and limitations, of the product.
Our cases further support this result. In Haywood v.
North American Van Lines, Inc., 121 F.3d 1066 (7th Cir.
1997), we considered the claim for overtime by a
customer service representative for a moving company.
The plaintiff was responsible for settling customer com-
plaints “to ensure quality service” and “to prevent the
customer’s dissatisfaction with some aspect of his move
from escalating into litigation.” Id. at 1068. In this role,
she served as the face of the company to claimants
and, sometimes, their attorneys. In concluding that she
satisfied the “directly related” prong of the administra-
tive exemption, we noted that her tasks, including
23
(...continued)
In sum, Reisick does not provide an apt analogy to the present
situation.
36 Nos. 10-3855, 11-1980 & 11-2131
serving as the “sole contact” with customers and
“represent[ing] the[] employer,” were among “the types
of classic administrative functions” contemplated by the
regulation. Id. at 1072. We similarly concluded that her
work was clearly of substantial importance to the
business, in part because her role was to protect the
customer base by keeping customers “happy” and to
minimize possible litigation exposure that could result
from dissatisfied customers. Id.
Similarly, in Roe-Midgett v. CC Services, Inc., 512 F.3d
865 (7th Cir. 2008), we held that work performed by
automobile damage appraisers satisfied the “directly
related” prong, even when their duties did not
include making pivotal determinations of coverage or
liability. In Roe-Midgett, the employer provided, under
contract, claims processing services for liability insurers.
The employees in question spent most of their time in-
vestigating automobile accidents in the field, inter-
viewing witnesses, physically inspecting damage and
estimating repair costs using appropriate software. If
the appropriate authorities within the company deter-
mined that liability had been established and cov-
erage approved, the employees were empowered to
settle lower-end claims consistent with their estimates.
In reaching our conclusion that they were part of the
employer’s general business operations, we noted that
the plaintiff damage appraisers operated with minimal
oversight in settling more than half of all claims that
the employer processed. We found significant that the
appraisers were the “ ‘face’ ” of the employer to third
parties, specifically, insurance claimants and mechanics;
No. 10-3855, 11-1980 & 11-2131 37
furthermore, their “front line[]” tasks were more properly
characterized as administrative as opposed to that of
a “postindustrial equivalent of production workers.”
Id. at 871-72.
We also find support in a decision from our colleagues
in the First Circuit, Reich v. John Alden Life Insurance Co.,
126 F.3d 1 (1st Cir. 1997). In John Alden, the First
Circuit evaluated a claim by marketing representatives
who claimed that John Alden had misclassified them
as exempt and denied them overtime in violation of
the FLSA. The marketing representatives did not sell
insurance products to end-consumers; instead, they
managed relationships with a list of independent field
agents who worked directly with customers seeking
insurance. The field agents, who were not employed
by John Alden, would rely on the information provided
by the marketing representatives in preparing insurance
proposals and in recommending insurance products to
consumers. Those field agents typically recommended a
range of products, including both those offered by
John Alden and by its competitors. Each representative
maintained his own “deck” of agents, usually 500-600,
and was responsible for “continually cull[ing] [his] deck[]
to maintain an active agent base.” Id. at 3-4 (quota-
tion marks omitted). The marketing representatives
did not sell insurance products to the agents or to the
customers; instead, they encouraged the use of John
Alden’s products by rigorously maintaining contact with
a critical middleman in the chain to the customer. The
First Circuit, drawing on the Third Circuit’s decision
in Martin v. Cooper Electric Supply Co., 940 F.2d 896 (3d
38 Nos. 10-3855, 11-1980 & 11-2131
Cir. 1991), held that the marketing representatives were
performing administrative work. Specifically, the court
concluded that they were engaged in “ ‘activit[ies] ancillary
to’ ” the employer’s principal function. John Alden, 126
F.3d at 10 (emphasis in original); see also id. (agreeing
with the district court’s conclusion that “the day-to-day
activities of marketing representatives are more in the
nature of ‘representing the company’ and ‘promoting
sales’ of John Alden products, two examples of exempt
administrative work provided by” the regulations then
in effect). The court also acknowledged that the repre-
sentatives played no meaningful role in negotiation.
Although they recommended “appropriate combina-
tion[s]” of John Alden products, they did not price them
or approve ultimate applications for coverage. Id. at 4.
The parallels between the present case and Haywood, Roe-
Midgett and John Alden convince us that the work done
by the pharmaceutical sales representatives properly
is characterized as administrative. The representatives
before us are the public face of their employer to the
most important decision-maker regarding use of their
companies’ products, the prescribing physicians. The
representatives neither produce the employers’ products
nor generate specific sales, but service the production
and sales aspects of the business by communicating
the employers’ message to physicians. The goal of their
work is to increase market share indirectly or, stated
differently, to promote sales. To the maximum extent
possible, their work is based on maintaining continuous
and regular contact with the physicians to whom they
are assigned, anticipating their objections and concerns
No. 10-3855, 11-1980 & 11-2131 39
and addressing them on behalf of their employers.
We therefore conclude that the sales representatives’
primary duty is the performance of work directly
related to the general business operations of the
employers, which satisfies the second prong of the ad-
ministrative exemption.
2. Primary Duty Includes the Exercise of Discretion
and Independent Judgment
The third prong of the administrative exemption
requires that the employee’s “primary duty include[] the
exercise of discretion and independent judgment with
respect to matters of significance.” 29 C.F.R. § 541.200(a)(3).
Again, the regulations provide substantial further detail:
(a) To qualify for the administrative exemption,
an employee’s primary duty must include the
exercise of discretion and independent judgment
with respect to matters of significance. In general,
the exercise of discretion and independent judg-
ment involves the comparison and the evaluation
of possible courses of conduct, and acting or
making a decision after the various possibilities
have been considered. The term “matters of sig-
nificance” refers to the level of importance
or consequence of the work performed.
(b) The phrase “discretion and independent judg-
ment” must be applied in the light of all
the facts involved in the particular employment
situation in which the question arises. Factors to
40 Nos. 10-3855, 11-1980 & 11-2131
consider when determining whether an employee
exercises discretion and independent judgment
with respect to matters of significance include, but
are not limited to: whether the employee has
authority to formulate, affect, interpret, or imple-
ment management policies or operating practices;
whether the employee carries out major assign-
ments in conducting the operations of the
business; whether the employee performs work
that affects business operations to a substantial
degree, even if the employee’s assignments are
related to operation of a particular segment of
the business; whether the employee has authority
to commit the employer in matters that have
significant financial impact; whether the em-
ployee has authority to waive or deviate from
established policies and procedures without
prior approval; whether the employee has author-
ity to negotiate and bind the company on signifi-
cant matters; whether the employee provides
consultation or expert advice to management;
whether the employee is involved in planning
long- or short-term business objectives; whether
the employee investigates and resolves matters
of significance on behalf of management; and
whether the employee represents the company in
handling complaints, arbitrating disputes or
resolving grievances.
(c) The exercise of discretion and independent
judgment implies that the employee has authority
to make an independent choice, free from immedi-
No. 10-3855, 11-1980 & 11-2131 41
ate direction or supervision. However, employees
can exercise discretion and independent judg-
ment even if their decisions or recommendations
are reviewed at a higher level. Thus, the term
“discretion and independent judgment” does not
require that the decisions made by an employee
have a finality that goes with unlimited authority
and a complete absence of review. The decisions
made as a result of the exercise of discretion
and independent judgment may consist of recom-
mendations for action rather than the actual
taking of action. The fact that an employee’s deci-
sion may be subject to review and that upon occa-
sion the decisions are revised or reversed after
review does not mean that the employee is not
exercising discretion and independent judgment.
For example, the policies formulated by the
credit manager of a large corporation may be
subject to review by higher company officials who
may approve or disapprove these policies. The
management consultant who has made a study
of the operations of a business and who has
drawn a proposed change in organization may
have the plan reviewed or revised by superiors
before it is submitted to the client.
(d) An employer’s volume of business may make
it necessary to employ a number of employees to
perform the same or similar work. The fact that
many employees perform identical work or
work of the same relative importance does not
mean that the work of each such employee does
42 Nos. 10-3855, 11-1980 & 11-2131
not involve the exercise of discretion and inde-
pendent judgment with respect to matters of
significance.
(e) The exercise of discretion and independent
judgment must be more than the use of skill in
applying well-established techniques, procedures
or specific standards described in manuals or
other sources. The exercise of discretion and
independent judgment also does not include
clerical or secretarial work, recording or tabulating
data, or performing other mechanical, repetitive,
recurrent or routine work. An employee who
simply tabulates data is not exempt, even if
labeled as a “statistician.”
(f) An employee does not exercise discretion and
independent judgment with respect to matters
of significance merely because the employer will
experience financial losses if the employee fails
to perform the job properly. For example, a mes-
senger who is entrusted with carrying large
sums of money does not exercise discretion and
independent judgment with respect to matters
of significance even though serious consequences
may flow from the employee’s neglect. Similarly,
an employee who operates very expensive equip-
ment does not exercise discretion and indep-
endent judgment with respect to matters of signifi-
cance merely because improper performance of
the employee’s duties may cause serious financial
loss to the employer.
Id. § 541.202 (internal citation omitted).
No. 10-3855, 11-1980 & 11-2131 43
The plaintiffs contend that their work fails to meet the
standard set forth in the regulation. The Department of
Labor supports the position of the plaintiffs, relying
principally on its own prior opinion letters in other con-
texts, as well as the Second Circuit’s decision in
Novartis, 611 F.3d 141. By contrast, the pharmaceutical
companies assert that the representatives had a host of
core duties committed to their discretion, including
determining how best to gain access to particular physi-
cians and managing their limited discretionary budgets.
Their primary argument, however, focuses on the discre-
tion that an individual representative must employ in
the course of an individual sales call with a physician
to communicate effectively his employer’s core message
to the specific audience and to address a physician’s
particular concerns.
The application of the discretion and independent
judgment prong in the pharmaceutical sales context is a
question of first impression in this circuit. Several of
our sister circuits have considered similar cases, how-
ever, and, we begin our consideration of this facet of
the case by examining their holdings. We focus on two
decisions that place the issue before us in stark relief.
The first is the case upon which the plaintiffs,
supported by the Secretary, rest a substantial part of their
argument, the Second Circuit’s decision in Novartis,
611 F.3d 141. The employer in Novartis raised almost
identical arguments concerning the discretion exercised
by its representatives to those that Abbott and Lilly
raise here. The Second Circuit rejected those arguments,
44 Nos. 10-3855, 11-1980 & 11-2131
largely by “[c]omparing the record as to the Reps’
primary duties against the illustrative factors set out in
§ 541.202(b).” 611 F.3d at 156. The court concluded that
the record before it showed no genuine issue of fact on
some specific factors in the regulation, including the
authority to commit the employer on matters having
significant financial impact or to formulate management
policies or practices. The court further concluded that
other activities evinced not discretion but simply the
application of skill. Not only is the application of skill
to established practices insufficient to demonstrate discre-
tion, see 29 C.F.R. § 541.202(e), the Second Circuit deter-
mined that the “skills are exercised within severe limits
imposed by” the employer. Novartis, 611 F.3d at 157.
Finally, the court concluded that those matters truly
within the discretion of the representatives, such as
setting daily schedules, allocating budgets for promo-
tional events and allocating samples, were too insignif-
icant to warrant application of the exemption.
By contrast, in Smith v. Johnson & Johnson, 593 F.3d
280 (3d Cir. 2010), the Third Circuit reached an
opposite result. The court took note of the plaintiff’s
own characterization of her independence in performing
her job responsibilities. Specifically, the Smith plaintiff
stated that she was allowed “to run the territory the way
[she] wanted to,” id. at 283 (quotation marks omitted),
which the court characterized as an admission that she
was “the manager of her own business,” id. at 285.
Notably, however, although the Third Circuit carefully
limited its holding to “the specific facts developed in
discovery” in the case before it, id. at 283 n.1, the job
No. 10-3855, 11-1980 & 11-2131 45
responsibilities to which the plaintiff referred closely
mirrored those described for the Novartis representa-
tives. As the Third Circuit described those duties:
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, how-
ever, 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.
46 Nos. 10-3855, 11-1980 & 11-2131
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 “com-
mitment” 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 ac-
companied 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.” 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
No. 10-3855, 11-1980 & 11-2131 47
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.
593 F.3d at 282-83 (alteration in original) (citation omitted).
Emphasizing the Third Circuit’s consideration of the
plaintiff’s deposition testimony, the plaintiffs here, sup-
ported by the Secretary, contend that the decisions of
the Second and Third Circuits are not in conflict. Such a
view simply distracts from the very real disagreement
between those circuits. It is true that the Smith case in-
cluded damaging deposition admissions by the plain-
tiff: She characterized her job as the manager of her
own business. Nevertheless, the court’s ultimate analytical
focus was, quite properly, on the nature of her day-to-
day duties, duties strikingly similar to those of the plain-
48 Nos. 10-3855, 11-1980 & 11-2131
tiffs in Novartis and to the plaintiffs in the cases now
before us. It is those day-to-day duties on which a
proper analysis under the FLSA rests, not merely the
parties’ characterizations of those duties as involving
discretion or not. See Roe-Midgett, 512 F.3d at 870.
Our examination of the records in these cases convinces
us that the representatives were required to exercise a
significant measure of discretion and independent judg-
ment, despite the constraints placed on them, and
indeed on all representatives of the pharmaceutical
industry, by the regulatory environment in which they
must live. See Kennedy v. Commonwealth Edison Co., 410
F.3d 365, 374-75 (7th Cir. 2005) (noting that the presence
of strict regulatory limits channeling employee discre-
tion did not prevent exercise of independent judgment).
Indeed, despite these constraints, it is in the core
function of the representatives’ duties, the physician
office visits, that we see the most important exercise of
discretion and professional judgment on their part. Al-
though the regulatory constraints of the industry
dictate that the representatives must deliver the pharma-
ceutical companies’ messages with precision, the rep-
resentatives nevertheless are sent into physicians’ offices
with minimal supervision to engage in conversation
with the prescribing physicians who, as a practical
matter, are in the most direct position to determine
whether their companies’ products have a viable mar-
ket. In speaking to individual physicians, the representa-
tives must tailor their messages to respond to the cir-
cumstances, whether those be the time or attention con-
straints from the physician or the concerns and objec-
No. 10-3855, 11-1980 & 11-2131 49
tions that are voiced during a particular or previous
visit. See supra note 9 (quoting the representatives’ own
descriptions of their physician interactions). Indeed,
although the companies gave the representatives
precise wording and materials, they certainly did not
treat the representatives as simple mouthpieces, re-
citing scripts. The records show that, although most rep-
resentatives had no medical background, the companies
trained them extensively in disease processes, their own
assigned products and products manufactured by competi-
tors; indeed, they were tested in their substantive knowl-
edge. The level of attention given to substantive educa-
tion demonstrates that the company viewed these in-
dividuals as employees needing a solid understanding
of the message that they were delivering if they were to
fulfill their roles as the company’s representative to
the community of practicing physicians. A significant
amount of discretion is no doubt required to determine
when the physician’s inquiry is sufficiently nuanced
to require a response from a more knowledgeable in-
dividual than the representative himself. The representa-
tive who is unable to tailor the conversation to the
time and circumstances, or to engage the physician in
an intelligent conversation, is understandably not an
effective representative to the professional community
whose estimation of the company is key to its success.
Beyond these physician interactions, which we con-
sider to be the critical function of the job and the place
in which discretion is most evident, the representatives’
other duties related to the actual call on the physi-
cian also manifest a substantial measure of judgment.
50 Nos. 10-3855, 11-1980 & 11-2131
Although representatives are given specific call plans
identifying the physicians to be visited and the degree
of frequency or priority category for each physician,
several representatives testified that they apply a
measure of strategic analysis to their work, choosing to
see physicians not on their call plans or non-physicians
who may influence prescribing patterns. See supra note
14 (describing discretion applied to call plans). They
work collaboratively with one another, proposing com-
prehensive visit plans for the territories and checking
in regularly by phone to keep each other abreast of devel-
opments in particular visits with physicians. Representa-
tives also spend the vast majority of their time entirely
unsupervised. Although they keep extensive records,
through which management can and does monitor
their progress, neither the fact that management
reviews their work nor that they are required to keep
such records detracts from the discretion they exercise
in the core of their workday. See 29 C.F.R. § 541.202(c)
(regarding review by supervisors); Piscione v. Ernst &
Young, L.L.P., 171 F.3d 527, 538 (7th Cir. 1999) (“Just
because an employee may spend a significant portion of
his time engaged in ministerial or routine tasks does
not necessarily prevent the application of the admin-
istrative exemption.”).
As the Second Circuit noted in Novartis, there are
a number of tasks listed in the regulations as “[f]actors to
consider” in determining whether an employee exer-
cises discretion that are clearly not present in this case.
See 29 C.F.R. § 541.202(b). We previously have acknowl-
edged, however, that the nature of a large, modern busi-
No. 10-3855, 11-1980 & 11-2131 51
ness does not permit any one employee to exercise all
of the functions listed in these general regulations. See
Verkuilen v. MediaBank, LLC, 646 F.3d 979, 982-83 (7th
Cir. 2011) (“It is true that the regulation, only a few provi-
sions of which we have quoted (it goes on and on), lists
a number of ‘administrative’ functions that the plaintiff
did not perform, such as negotiating contracts with
MediaBank’s customers. But below the highest executive
level a modern business is a congeries of specialists.”
(emphasis in original)). The ultimate question is not
whether the plaintiff did all, or any, of the specific
tasks listed in § 541.202(b); the list identifies itself as
exemplary and non-exhaustive.
Indeed, in the preamble to the current regulations, after
setting forth the factors now listed in § 541.202(b), the
Secretary continues:
Other factors which federal courts have found
relevant in assessing whether an employee exer-
cises discretion and independent judgment
include the employee’s freedom from direct supervi-
sion, personnel responsibilities, troubleshooting
or problem-solving activities on behalf of manage-
ment, use of personalized communication techniques,
authority to handle atypical or unusual situations,
authority to set budgets, responsibility for assessing
customer needs, primary contact to public or customers
on behalf of the employer, the duty to anticipate compet-
itive products or services and distinguish them from
competitor’s products or services, advertising or
promotion work, and coordination of departments,
52 Nos. 10-3855, 11-1980 & 11-2131
requirements, or other activities for or on behalf of
employer or employer’s clients or customers.
69 Fed. Reg. at 22,144 (emphasis added). Although
certain of these specific factors clearly apply to the
present case, the most important point is that this
passage makes clear that the determination of discretion
is a circumstance-specific one that will look different
from industry to industry and position to position. This
list of factors is not a checklist; it is a guide. The particular
discretion exercised by the representatives before us is
within the range of cases in which the exemption has
been applied. See, e.g., Verkuilen, 646 F.3d at 982 (holding
that an account manager at a software company who
“[i]dentif[ied] customers’ needs, translat[ed] them into
specifications to be implemented by the developers, [and]
assist[ed] the customers in implementing the solutions”
qualified for the administrative exemption); Piscione,
171 F.3d at 535-36 (concluding that a human resources
consultant exercised discretion in his duties by, among
other things, “improv[ing] client services” and being
“responsible for several clients”); John Alden, 126 F.3d at
13 (finding sufficient discretion where “the marketing
representatives rely on their own knowledge of an
agent’s business to help tailor proposals for the agent’s
end-customers” and are “able to anticipate the
competing products that the agent’s customers might be
considering, and distinguish John Alden’s offerings
from those of competitors”).
Finally, the plaintiffs and the Secretary briefly contend
that the work of the representatives principally involves
No. 10-3855, 11-1980 & 11-2131 53
the application of skill, rather than judgment. Although
they are correct that the regulations draw this distinc-
tion and caution that skill is insufficient to warrant
the exemption, skill and judgment are not mutually
exclusive. The records clearly demonstrate that the repre-
sentatives receive extensive skills training, particularly
on sales techniques. They most certainly employ this
skill, and, indeed, many others in the course of their
daily duties. Nevertheless, applying these skills entails
a great deal of judgment. The job requires far more
than “applying well-established techniques, proce-
dures or specific standards described in manuals.” 29
C.F.R. § 541.202(e). It does not involve simple “clerical or
secretarial work, recording or tabulating data, or perform-
ing other mechanical, repetitive, recurrent or routine
work.” Id.
Conclusion
The pharmaceutical sales representatives employed
by Abbott and Lilly in these cases are properly character-
ized as exempt administrative workers. In case number 10-
3855, we therefore affirm the judgment of the district
court.24 In cases 11-1980 and 11-2131, we reverse the
24
With respect to case number 10-3855, Ms. Schaefer-LaRose also
argues that the district court erred in failing to apply the
Second Circuit’s opinion in In re Novartis Wage & Hour Litigation,
611 F.3d 141 (2d Cir. 2010), to her New York state law claims.
With her motion to reconsider pending before the district
court, Ms. Schaefer-LaRose supplemented the record, providing
(continued...)
54 Nos. 10-3855, 11-1980 & 11-2131
judgment in favor of the plaintiff class, and we direct
the court to enter judgment in favor of Abbott.
No. 10-3855, A FFIRMED;
Nos. 11-1980 and 11-2131, R EVERSED and R EMANDED
with INSTRUCTIONS
24
(...continued)
the court with a citation to the Second Circuit’s opinion in
Novartis, in which the court held that pharmaceutical sales
representatives are not exempt under the FLSA. Yet, in doing
so, she made no argument with respect to her state law
claims, and we therefore conclude that this argument is for-
feited. See Ocean Atl. Dev. Corp. v. Aurora Christian Sch., Inc., 322
F.3d 983, 1005 (7th Cir. 2003) (noting that arguments not
raised before the district court are forfeited).
We further note that, in its opinion, the Second Circuit
explicitly acknowledged that neither party had challenged
the district court’s conclusion that there was no meaningful
distinction between state and federal law. The Second Circuit
accordingly treated the exemptions the same under both
state law and the FLSA.
5-8-12