In a case experts say will open the door for more gender bias lawsuits, pharmaceutical giant Novartis was ordered on Wednesday to pay $250 million in punitive damages to current and former U.S. female employees who accused the company of discriminating against them.
Earlier this week, Novartis - which for the past 11 years has won a spot on Working Mother's best companies list - was ordered to pay $3.3 million in compensatory damages to 12 female former sales representatives who claimed in court that the company treated them unfairly because they were women and, in some cases, because they got pregnant. The jury's verdict was unanimous.
The six-week-long class action lawsuit is the largest discrimination matter ever to go to trial in the U.S., the plaintiff's law firm, Sanford Wittels & Heisler, said in a statement. The case involves 5,600 women in the U.S. unit of the Swiss company. Novartis' total damages bill could top $1 billion, with each of the 5,600 women potentially able to claim as much as $300,000 between punitive and compensatory damages.
Michael Delikat, the chair of the global employment law practice at Orrick Herrington & Sutcliffe (and who is not involved in the case), told the National Law Journal that the case is part of a "perfect storm" in gender discrimination. It comes as the Obama administration has taken "a very aggressive stance on gender discrimination and equal pay issues," he said. In April, a federal appeals court ruled that a gender-discrimination suit against Wal-Mart, first filed in 2001, could move forward as a class action suit, a decision that could potentially cost the company upwards of $1 billion.
Of the Novartis case, Delikat said the punitive damages award "is a huge number that will grab the attention of a lot of companies."
He added: "At the very least, this will completely change the settlement dynamic in existing cases. And at the very least, it will certainly lead to more litigation given the economic potential for the trial bar."
Plaintiffs' lawyer Steven Wittel said, "This will make women feel empowered. For too long, women have been kept silent and afraid to address the oppressive circumstances they're living with."
The case is called Velez v. Novartis Pharmaceuticals Corp. Lead plaintiff Amy Velez 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. "They hate it when you get pregnant," she told the New York Times upon filing the suit.
According to testimony during the case, women claimed that doctors groped them and made inappropriate comments. The company had a corporate culture that expected its female employees to be "available and amenable to sexual advances from the doctors they call on" and "looked the other way" when female representatives complained about inappropriate doctors. In one case, a doctor allegedly stuck his tongue in a saleswoman's ear. Novartis' response, according to the women, was to say the doctors were good customers, and not to overreact. Novartis said the women were lying.
The suit also claimed that the women were paid less, not promoted into management, and punished if they became pregnant.
"We are disappointed in the jury's verdict," said Andy Wyss, president of Novartis Pharmaceuticals, in a statement. "For more than 10 years the company has developed and implemented policies setting high standards with regards to diversity and inclusion for the development of our employees." The company plans to appeal.
Novartis lawyer Richard Schnadig pleaded with the five women and four men of the jury for mercy: "The company is taking everything you said to heart and is going to change. Be fair to us."
David Sanford, one of the plaintiffs' lawyers, said the award was meant both to punish the company - which owns the Gerber baby brands - for its behavior and to deter it and others from discriminating against female employees in the future.
Colleen McMahon, the judge hearing the case, had instructed the jury to consider their award in light of the "offensiveness of Novartis' behavior, the nature and extent of the harm done, the length of time the class endured the behavior, the extent to which Novartis knew about the discrimination and how they reacted once they were on notice." She also said the amount should reflect Novartis' financial condition in order to act as a deterrent. (Sanford had asked for $285 million, or 2 to 3 percent of its $9.5 billion revenue for 2009.)
Sanford said the plaintiffs are seeking "sweeping changes" to Novartis' performance appraisal system, human resources department, pay and promotion systems, and pregnancy policy.
Holly Waters, one of the 12 plaintiffs, said of the verdict: 'I feel like it's a huge victory for working mothers in all industries." She testified she was threatened by her manager that she'd be fired if she took one more sick day because of morning sickness during pregnancy. She was fired after giving birth.
Working Mother Media president Carol Evans said that she was 'disappointed that Novartis has engaged in discriminatory practices against women and mothers' but defended the magazine's choice of the company, saying it was based on programs that Novartis had in place to support working mothers, like flex time, telecommuting and paid maternity leave.
'We hope that Novartis will not appeal the ruling against them and instead turn their efforts to making sure that the company has no further incidences of discrimination,' Ms. Evans said.