Novartis, Female Sales Reps to Settle Sex Bias Class Action for $175 Million

On Behalf of | July 15, 2010 | News

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, DC

Judge Colleen McMahon must still consider whether to grant final approval to the settlement agreement and has scheduled a fairness hearing for Nov. 19.

Female Sales Reps Claimed Bias in Pay, Promotions

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, DC, represented Velez and the other sales reps. Evan R. Chesler and Darin P. McAtee of Cravath, Swaine & Moore in New York represented Novartis.