Novartis Hit with 250 Million Dollars in Punitive Damages

July 1, 2010

A Manhattan jury recently returned a verdict of $250,000,000 in punitive damages against the Swiss pharmaceutical company Novartis Corporation. The jury found that Novartis discriminated in pay, promotional opportunities and pregnancy-related matters, the lawyers said following a six-year class-action suit. 

This case involved a class action brought on behalf of 5,600 current and former female Novartis employees. There were 12 named plaintiffs for the purposes of trial who worked as sales representatives. The lead plaintiff was Amy Velez, who was hired by Novartis in 1997 as a sales representative in Washington, D.C. She worked at the company until 2004, the year the suit was filed.

The plaintiffs claimed that Novartis engaged in the pattern of discrimination by paying female sales force employees less than its male employees and by denying them the same opportunities for promotions as male employees. The plaintiffs claimed that this gender discrimination included policies and/or practices of restricting the promotion and advancement opportunities of female employees so that they remain in lower classification and compensation levels. They claimed that Novartis in effect barred females from better and higher paying positions which have traditionally been held by male employees. They claimed that the systemic means of accomplishing such gender stratification included Novartis’ promotion, advancement, training and performance evaluation policies, practices and/or procedures.

Specifically, the plaintiffs alleged that Novartis’ promotion, advancement, training and performance evaluation policies, practices and/or procedures incorporated the following discriminatory practices:

  • Relying upon subjective judgments, procedures and criteria which permit and encourage the incorporation of gender stereotypes and bias by Novartis’ predominately male managerial and supervisory staff in making promotion, training, performance evaluation and compensation decisions
  • Refusing or failing to provide equal training opportunities to females
  • Refusing or failing to provide female employees with opportunities to demonstrate their qualifications for advancement
  • Refusing or failing to establish and/or follow policies, practices, procedures or criteria that reduce or eliminate disparate impact and/or intentional gender bias
  • Using informal, subjective selection methods which allow for gender discrimination
  • Disqualifying female employees for vacancies by unfairly disciplining them
  • Discouraging applications and expressions of interest by females
  • Subjecting pregnant employees or female employees with children to adverse treatment and denying them opportunities to advance their careers

Jury Verdict
The jury agreed with the named plaintiffs and awarded more than 3.3 million dollars in compensatory damages to these plaintiffs, and 250 million dollars in punitive damages. The damages for the remaining class members have not been determined. There are estimates that those damages could bring the total verdict to one billion dollars. The plaintiffs will also ask the court to issue a ruling directing systemic changes toward women workers at Novartis. Novartis plans to appeal the verdict. Velez v. Novartis Corp., 04-CV-09194, U.S. District Court, Southern District of New York (Manhattan).

Rise in Class Action Litigation
Although Novartis may have meritorious arguments on appeal, this verdict is one among many recent class action verdicts and settlements across the nation that is in the multi-million dollar range. The difficulty that employers face with class action litigation is that a relatively small differential in wage payments, when multiplied over thousands of employees over a multi-year period, can create a very large liability. Both the EEOC and private attorneys have been aggressively pursuing class-wide wage and hour and discrimination cases against medium-sized and large employees. This trend does not appear to have any end in sight.

Bottom Line
Employers cannot be too careful when making systemic decisions and in implementing systemic policies. It is imperative that employers closely monitor all levels of management to insure that neutral policies and being implemented correctly. Employers should seriously consider engaging in self-auditing, through the assistance of counsel. Employers should proactively identify any potential areas of concern and take remedial action to alter any areas which could be open to criticism. Employers should specifically review all of their employment policies, including hiring, promotion, and disciplinary policies, to determine whether there is any argument to support a claim of gender stereotyping or other subjective decision-making which may lead to an inference of gender discrimination.

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