Novartis Settles Gender Bias Class Action for $175 Million

Novartis AG will pay $175 million to settle a class-action lawsuit accusing the Swiss drugmaker of discriminating against 5,600 current and former female sales representatives in pay and promotions.

The settlement was announced less than two months after a Manhattan jury ordered on May 19 the company’s U.S. unit Novartis Pharmaceuticals Corp to pay $250 million in punitive damages, after a six-week trial.

That jury concluded Novartis engaged in a pattern of discrimination between 2002 and 2007.

Lawyers for the plaintiffs said it was the largest U.S. gender discrimination case ever to go to trial.

In a joint statement with the plaintiffs’ lawyers, Novartis said it will pay up to $152.5 million to class members, and an additional $22.5 million to improve companywide complaint processes, personnel oversight and performance assessments.

Female employees contended Novartis’ human resources division routinely ignored complaints about discrimination, including where pregnancies were involved.

Novartis spokeswoman Pamela McKinlay said in an email the accord resolves all gender bias claims in the 2004 lawsuit against the Basel-based company.

David Sanford, the plaintiff’s lead lawyer, said in a statement the terms allow “full compensation” for the women, “ensuring that every woman who worked at Novartis over the past eight years has been compensated fairly.”

Lawyers for the plaintiffs declined further comment.

LARGER AWARD AVOIDED

By settling, Novartis avoided the possibility of awarding large sums of compensatory damages.

Two days before setting punitive damages, the jury of five women and four men awarded an additional $3.3 million of compensatory damages to 12 women who testified.

That could have opened the door for thousands of other women covered by the lawsuit to claim such damages, likely to be awarded by a court-appointed special master.

The Novartis case is not the largest gender bias class-action pending in U.S. courts.

In April, the U.S. Ninth Circuit Court of Appeals in San Francisco, in a 6-5 ruling, said a lawsuit accusing Wal-Mart Stores Inc. of discriminating against women in pay and promotions may proceed as a class action.

That case could affect more than 1 million current and former female workers. Analysts have estimated it could cost the world’s largest retailer several billion dollars in damages if it remains a class-action. Wal-Mart has said it would appeal to the U.S. Supreme Court.

The Novartis settlement requires approval by U.S. District Judge Colleen McMahon. A hearing is scheduled for Nov. 19.

Novartis’ U.S.-listed shares closed up 63 cents, or 1.3 percent, at $50.75 on the New York Stock Exchange. The company announced the settlement after U.S. markets closed.

The case is Velez et al v. Novartis Pharmaceuticals Corp, U.S. District Court, Southern District of New York, No. 04-9194.

(Reporting by Grant McCool and Jonathan Stempel in New York; editing by Andre Grenon)