Yet another class action has been filed in federal court challenging the exemption status of employees in the healthcare industry under the Fair Labor Standards Act (FLSA).  This time, in Li v. Health Plus, the challenge comes from marketing representatives for a health maintenance organization (HMO)  who go to various locations, such as schools, churches, hospitals, and community centers in low-income neighborhoods to enroll Medicaid-eligible individuals in their programs, and claim they were misclassified as exempt employees.

This is the second overtime suit filed by a class of HMO marketing representatives in the Eastern District of New York.  Three years ago, in Willix v. HealthFirst, Inc., Gertrude Willix filed suit against her employer, alleging marketing representatives who visited low-income neighborhoods to enroll Medicare-eligible individuals in its plans were misclassified as exempt and denied overtime in violation of the FLSA and New York wage law.  In December 2009, the parties stipulated to a class and the court granted plaintiffs’ unopposed motion for certification of the state law claims as a class action under Rule 23 and the FLSA claims as a collective action. Defendants are now seeking to amend their answer to assert, as a defense, that is marketing representatives are eligible for the administrative and combination exemption in addition to the outside sales exemption that they had previously asserted.

Class actions challenging the exempt classification of sales representatives in the pharmaceutical industry have become almost commonplace, but this new suit could indicate an expansion of such claims into the areas of HMOs and healthcare plans.

As mentioned in an earlier blog post, pharmaceutical companies have met with some success in asserting the outside salesperson exemption in FLSA collective actions brought by their sales representatives  even though pharmaceutical representatives do not “make sales” or “obtain contracts” in the  literal sense.  Thus, there is a possibility that HMO and other healthcare benefit plan marketing representatives may similarly qualify as exempt outside salespersons even though they are not literally “selling” an HMO or health insurance plan’s  products to benefit recipients. For HMOs and other types of healthcare benefit plans the Willox and Li cases are worth watching, and we will follow developments in these cases as they occur.

This entry was written by Meredith C. Shoop.