Novartis, Female Sales Reps to Settle Sex Bias Class Action for $175 Million
BNA Daily Labor Report
Daily Labor Report®
Volume: 135 Number: 135
July 15, 2010
Novartis, Female Sales Reps to Settle Sex Bias Class Action for $175 Million
A federal district court in New York July 14 granted preliminary approval to a $175 million agreement between Novartis Pharmaceuticals Corp. and a nationwide class of female current and former sales employees to settle claims of systemic sex bias in pay, promotions, and pregnancy leave (Velez v. Novartis Pharm. Corp., S.D.N.Y., No. 04-9194, order preliminarily approving settlement 7/14/10).
Novartis has agreed to pay up to $152.5 million for back pay and compensatory damages and to provide an additional $22.5 million in nonmonetary relief for companywide equal employment opportunity improvements, training, and enhanced bias complaint processes, according to the agreement.
The agreement would replace two jury verdicts awarding female pharmaceutical sales representatives, led by Amy Velez, $3.4 million in compensatory damages (94 DLR A-1, 5/18/10) and $250 million in punitive damages (96 DLR AA-1, 5/20/10) on claims the company violated Title VII of the 1964 Civil Rights Act.
The nationwide settlement class could include as many as 5,600 current and former female sales employees who worked for the company between July 15, 2002, and July 14, 2010, according to the agreement preliminarily approved by the U.S. District Court for the Southern District of New York.
“In this settlement, Novartis establishes itself as a leader on issues for women in the workplace,” Katherine M. Kimpel, an attorney representing the sales reps, said in a July 14 statement. She asserted that Novartis “is committed to substantially revising its human resources policies, revamping its management systems, and strengthening its commitment to ensuring gender equality in the workplace.” Kimpel is with Sanford Wittels & Heisler in Washington, D.C.
Judge Colleen McMahon must still consider whether to grant final approval to the settlement agreement and has scheduled a fairness hearing for Nov. 19.
“While we believe that there was not systemic discrimination at [Novartis], the trial revealed that some of our associates had experiences influenced by managerial behavior inconsistent with our values,” Joe Jimenez, the company's chief executive officer, said in a July 14 statement.
“As a company we are now even more strongly resolved to ensure that all our employees act and behave in accordance with our corporate values,” Jimenez said. “We aspire to be a leader in diversity and inclusion, and I am committed to implementing decisive measures to ensure that we act in accordance with our values.”
The agreement states that the company, the U.S. subsidiary of Swiss pharmaceuticals giant Novartis AG, denies all claims of liability or wrongdoing.
The approximately 17 named plaintiffs each would receive service awards ranging from $331,000 to $425,000 and also would be eligible to receive back pay awards from the settlement fund. Eligible class members who can show they experienced particularly severe discriminatory treatment could receive up to $300,000 in additional compensatory damages, according to the agreement.
The sales reps' attorneys will receive up to $40 million in fees and expenses from the settlement fund, and $164,500 from the fund is slated to be donated to an unspecified nonprofit organization for the advancement of women in the workforce, the agreement says.
Novartis has agreed to pay up to $152.5 million for back pay and compensatory damages and to provide an additional $22.5 million in nonmonetary relief for companywide equal employment opportunity improvements, training, and enhanced bias complaint processes.
Velez filed the lawsuit as a potential class action in federal court in February 2005 (33 DLR A-12, 2/18/05), alleging that the women were denied promotions, paid less than their male counterparts, and subjected to a hostile work environment in violation of Title VII.
The court granted their motion to proceed as a class under Rule 23 of the Federal Rules of Civil Procedure in July 2007 (149 DLR A-11, 8/3/07), certifying a class of women who had worked for Novartis since July 15, 2002, as sales representatives, sales consultants, district managers, and other sales-related positions.
A jury on May 17, 2010, found Novartis liable for sex discrimination and awarded $3.4 million in compensatory damages. Two days later the jury awarded the women punitive damages of $250 million--an award their attorneys said was the largest ever in a sex discrimination verdict.
Novartis also has agreed to revise its sexual harassment policy and training program to make clear that it will not tolerate inappropriate conduct from employees, customers, or health care providers, to strengthen its complaint process to ensure complaints are promptly addressed, to retain an external auditor to help remedy pay and promotion disparities between male and female employees, and to revise its performance management process.
The parties estimate the monetary value of this “programmatic relief” at $22.5 million, according to the agreement.
In addition to Kimbel, David Sanford, Steven L. Wittels, and Grant Morris of Sanford Wittels & Heisler in Washington, D.C., represented Velez and the other sales reps. Evan R. Chesler and Darin P. McAtee of Cravath, Swaine & Moore in New York represented Novartis.
Text of the order granting preliminary approval may be accessed at http://op.bna.com/dlrcases.nsf/r?Open=jcwl-87dlzz. Text of the joint settlement agreement may be accessed at http://op.bna.com/dlrcases.nsf/r?Open=jcwl-87dm4f.