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Novartis agrees to settle class action sex bias suit for $175 million in monetary and non-monetary relief

Novartis Pharmaceuticals Corp has settled a class action sex bias suit brought by female sales representatives who alleged they were discriminated against in pay, promotional opportunities, and pregnancy-related matters only two months after a federal jury hit the multinational pharmaceutical company with a $250 million punitive damages verdict ( Velez v Novartis Pharms Corp, SDNY, No 04 Civ 9194, preliminary settlement approved July 14, 2010). On July 14, Novartis and attorneys for the plaintiffs, led by David Sanford of Sanford, Wittels & Heisler, announced the company will pay $175 million in monetary and non-monetary relief. The settlement provides up to $152.5 million to potentially thousands of female sales reps who worked for the pharmaceutical company since 2002; $60 million of the settlement fund will be allocated to cover back pay apportioned among the class representatives and proposed class members who do not opt out of the settlement. Class counsel will receive up to $38.1 million in attorneys’ fees and up to $2 million in expenses, according to the agreement.

In addition, the agreement, which was preliminarily approved by Judge P. Kevin Castel of the US District Court for the Southern District of New York on July 14, requires Novartis to spend an additional $22.5 million over three years to make changes to its policies and procedures in order to prevent future discrimination. Among the expected changes to its policies and procedures, Novartis will:

  • revise its sexual harassment policy and training, making it even clearer that the company will not tolerate inappropriate behavior or comments from employees, customers or healthcare providers;
  • further strengthen its complaint process to ensure employees can safely raise concerns and that those concerns will be addressed in a timely and thorough fashion;
  • retain an external specialist to conduct adverse impact analyses aimed at identifying and remedying, with recommendations from Class Counsel, unjustified gender disparities; and
  • will revise its performance management process to ensure it is fair to all employees.

A federal jury hit Novartis with the $250 million punitive damages verdict on May 19. The same jury, two days earlier, found the company liable for sex bias under Title VII and ordered it to pay testifying witnesses and named plaintiffs some $3.36 million in compensatory damages for their specific instances of discrimination. Novartis had said it would likely appeal the case. The settlement is in lieu of payment on the verdict. A fairness hearing is scheduled for November 19.

“Novartis has agreed to a momentous settlement,” explained David Sanford, lead counsel for the plaintiffs. “The terms of this agreement allow for full compensation of both former and current female field force employees, ensuring that every woman who worked at Novartis over the past eight years has been compensated fairly.”

“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” said Joe Jimenez, CEO of Novartis AG. “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. 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.”

Novartis is represented by Vedder Price, PC and Cravath Swaine & Moore LLP.