A recent jury award of $3.4 million in compensatory damages and $250 million in punitive damages has provided a chilling example of the inherent risks of defending against a "policy and practice" discrimination class action fueled by anecdotal examples of isolated, inappropriate conduct. Velez v. Novartis, a gender discrimination class action against a major pharmaceutical company, will surely ignite the interest of plaintiffs’ lawyers whose focus has recently been drawn away from discrimination claims and toward wage and hour litigation.

And, the litigation is not yet over. The remaining 5,600 women in the class may now seek their own individual compensatory damages through an arbitration process, which could take another year to conclude. The plaintiffs' counsel estimate that additional backpay awards could reach $1 billion or more. The judge can also order equitable relief, such as changes in Novartis’ policies and procedures. Novartis continues to dispute the verdict and it is very possible that the verdict could be reduced or overturned through post trial motions or at the appellate level.

Whatever the ultimate result, however, this verdict underscores the question: How did a pharmaceutical company that for the last 10 years has been named one of the top places to work by Working Mother magazine, find itself in this situation? The answer reveals a great deal about the class action process and the risks it poses for employers.

Background and Class Certification

The plaintiffs in the Novartis case claimed that the company engaged in a “continuing pattern and practice of discrimination against female employees” by, among other things, subjecting women to a sexually hostile work environment, denying woman equal treatment after pregnancy leaves, and denying females promotional opportunities in favor of less qualified male employees. In support of their claims, plaintiffs relied on two experts. One expert analyzed Novartis’ performance management and compensation systems and opined that they were “subjective” and vulnerable to bias against women. The second expert analyzed salary data and opined that the company’s compensation systems had a disparate impact on female employees, resulting in a disparity (of $74.82 per month) between the average earnings of male versus female employees.

Perhaps most significantly, to overcome pre-trial dismissal, the plaintiffs relied on affidavits from current and former employees describing a hostile environment against women who took maternity leaves. In one affidavit a female employee claimed that her manager told her he preferred not to hire young females because “[f]irst comes love, then comes marriage, then comes flex time and a baby carriage.” Another woman stated she was told by a manager to get an abortion and a third alleged that a speaker at a training session she attended when she was five months pregnant told the group to avoid getting pregnant early in their employment. Looking at the affiant, the trainer quipped, “Oops, too late.”

Largely based on these anecdotes, the court found that the plaintiffs had presented sufficient evidence of common issues to certify a class of all women who held sales-related jobs since 2002. The court acknowledged that it must be “wary of a claim that the true color of a forest is better revealed by reptiles hidden in the leaves than by the foliage of countless free-standing trees.” Nevertheless, the court concluded, “plaintiffs have produced enough foliage to raise questions about the forest's color. Whether or not the declarations are ultimately convincing to a fact-finder, they are numerous enough and detailed enough to establish that a common question exists.”

Two years later, and after the close of extensive discovery, the company moved for summary judgment on a number of the claims. The motion was denied in a very terse (two page) decision that concluded plaintiffs had presented sufficient evidence to satisfy the “minimal” burden of getting the claims to a jury – and that “Plaintiffs have demanded a jury, and a jury they shall have.”

The Trial and Verdict

The trial began on April 8, 2010, and ended with the jury’s verdict on May 19, 2010. In that six weeks, the jury heard testimony from female witnesses regarding unfair pay differentials with male coworkers, and being passed over for promotions or denied salary increases because they became pregnant or took maternity leave. The testimony that grabbed the attention of the press, however, was by a female sales representative who claimed she was raped by a doctor at a company-sponsored social event, then criticized by her manager and an HR executive and “blamed” for the rape incident. There was also testimony by a woman describing the manager who recited the “baby carriage” poem discussed above.

Novartis argued that such anecdotal evidence by only a handful of women among thousands of female employees did not approach the threshold of establishing a pattern and practice of discrimination. Moreover, to counter the plaintiffs’ testimony, Novartis presented testimony from a number of women who had great careers working for the company. The jury was obviously not convinced by these arguments, however, and not only found in favor of the plaintiffs, but also awarded them one of the largest compensatory and punitive damage awards ever in a gender discrimination class action.

As this case reflects, the class action mechanism can be a slippery slope and render an employer vulnerable to class-wide exposure and a potentially serious adverse jury verdict based on the conduct of just a few bad apples.

For more information on this significant jury verdict and suggestions for employers to reduce the risk of a similar result, see Littler’s ASAP, One of Largest Jury Verdicts in Gender Discrimination Class Action Awarded: What Lessons Can Be Learned, by Barbara Hoey.

This entry was written by Robert Wolff.