SCHAEFER-LaROSE v. ELI LILLY & CO.
679 F.3d 560 (2012)
United States Court of Appeals, Seventh Circuit.
Argued October 18, 2011.
Our examination of the records in these cases convinces us that the representatives were required to exercise a significant measure of discretion and independent judgment, 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 discretion 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. Although the regulatory constraints of the industry dictate that the representatives must deliver the pharmaceutical companies' messages with precision, the representatives 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 market. In speaking to individual physicians, the representatives must tailor their messages to respond to the circumstances, whether those be the time or attention constraints from the physician or the concerns and objections 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, reciting scripts. The records show that, although most representatives had no medical background, the companies trained them extensively in disease processes, their own assigned products and products manufactured by competitors; indeed, they were tested in their substantive knowledge. The level of attention given to substantive education demonstrates that the company viewed these individuals 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 individual than the representative himself. The representative 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 consider 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 physician also manifest a substantial measure of judgment. 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 comprehensive visit plans for the territories and checking in regularly by phone to keep each other abreast of developments in particular visits with physicians. Representatives 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 administrative 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 exercises discretion that are clearly not present in this case. See 29 C.F.R. § 541.202(b). We previously have acknowledged, however, that the nature of a large, modern business 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 provisions 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 exercises discretion and independent judgment include the employee's freedom from direct supervision, personnel responsibilities, troubleshooting or problem-solving activities on behalf of management, 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 competitive products or services and distinguish them from competitor's products or services, advertising or promotion work, and coordination of departments, 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 the application of skill, rather than judgment. Although they are correct that the regulations draw this distinction and caution that skill is insufficient to warrant the exemption, skill and judgment are not mutually exclusive. The records clearly demonstrate that the representatives 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, procedures 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 performing other mechanical, repetitive, recurrent or routine work." Id.