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Labor: The Peril of Systemic Discrimination Claims

Less than one month after the 9th Circuit approved a 500,000 member class asserting nationwide gender pay disparity and promotion claims against the country's largest retailer, a New York jury awarded more than $250 million to plaintiffs in a massive systemic gender discrimination class action against Novartis. Amy Velez, et al. v. Novartis Pharmaceuticals, Novartis Corporation, and Thomas Ebeling.

In July 2007, a federal judge in New York allowed 19 women to represent a class of all women who worked in sales-related positions at Novartis at any time since July 15, 2002. The gravamen of the plaintiffs' complaint was that "gender discrimination permeate[d] the corporate culture" at Novartis, including discrimination against women in compensation, promotions, personnel evaluations and pregnancy-related matters.

The judge's decision to certify the class was largely informed by declarations submitted by the plaintiffs and expert reports. The plaintiffs submitted extensive anecdotal evidence with declarations from 28 employees and three plaintiffs in 14 different states all claiming they were victims of pregnancy discrimination. The expert reports included evidence of subjective decision-making and statistics suggesting that women at Novartis received lower scores on performance evaluations and were less likely to be promoted.

Although employment class actions rarely proceed to trial, in April 2010, the Novartis trial began. In addition to expert testimony, both the plaintiffs and Novartis presented to the jury anecdotal evidence from a number of female employees. After six weeks of trial and jury deliberations, the jury ruled against Novartis--a company that has been repeatedly recognized by Working Mother magazine as one of the top 100 companies for working mothers--on the class action plaintiffs' claims of pay, promotion and pregnancy discrimination.

As has been widely reported in the news, the jury awarded $250 million in punitive damages to the class as a whole, as well as more than $3.3 million in compensatory damages to 12 named plaintiffs. The 5,600 remaining class members are still entitled to apply for compensatory damages.

In stark contrast to my last column on an employment discrimination decision favorable to employers, the Novartis case demonstrates how costly litigation of this nature can be for companies. Though the verdict may ultimately be modified by the district court or appealed to the 2nd Circuit, the Novartis case serves as an invaluable reminder of the significant liability involved in cases involving allegations of systemic discrimination. The case also draws attention to pregnancy-related discrimination lawsuits, which have been on the rise in recent years.

Vincent A. Cino is a partner in the Morristown, N.J., office of Jackson Lewis LLP. He is the firm's National Director of Litigation.

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