What Employers Can Learn from the Novartis Lawsuit

green_chalkboard_and_stacked_books_3Pharmaceutical giant Novartis recently defended a class action lawsuit filed by thousands of its female sales representatives alleging discriminatory treatment in pay and promotions. It was the largest gender discrimination case ever to reach a jury verdict. 

Novartis might need to stock up on their in-house supply of Diovan – their top-selling drug, which treats hypertension — as there are surely some Novartis executives with elevated blood pressure following the recent verdict. The jury awarded $250 million in punitive damages, $3.37 million in compensatory damages for the 12 named plaintiffs, with compensatory damages for the remaining members of the class to be determined separately. Experts estimate that Novartis could pay as much as $1 billion when all is said and done, and that doesn’t include legal fees expended to defend the mega-lawsuit.

Given the staggering nature of this award, an increase in employment class action lawsuits is almost certain. Class action suits are far more lucrative for plaintiff’s lawyers to take on, than a single employment discrimination lawsuit where damages rarely exceed a few hundred thousand dollars. In light of this new era which is sure to dawn : it is essential that employers examine their practices and consider their potential exposure in this area now.

Prevention is the Best Medicine

Audit pay classifications and EEO numbers.

Review your pay structure. Particularly in light of the Lily Ledbetter Act, which opens up exposure for employers potentially dating decades back, employers must be confident that their compensation structure does not reflect any trends that could be construed as discriminatory. Also, review your EEO numbers – this is one of the first things defense attorneys will do when their client is hit with a class action. Be aware, though, that if you run the numbers and they don’t look good, you’ve got to be willing to take action. Failing to take corrective action after a self-analysis could make the problem worse.

Outreach/Diversity in minority communities.

Fostering diversity programs within the workplace are good business and help to create a good corporate image while recruiting minority applicants. Because the recruiting/hiring process can be ripe ground for class action lawsuits, outreach is an important preventative step.

Hold managers accountable.

Make sure managers whose statements or actions result in company liability are held accountable. Where managers are appropriately trained, and take inappropriate actions nevertheless, one approach is to have litigation costs taken from the bottom line of the division for which the manager is responsible.

Have an internal EEO reporting procedure and train all employees.

Make sure you have an internal reporting procedure for any employee who has an EEO complaint, and that all employees understand that procedure. Handling any such complaints appropriately and with due diligence often can effectively head off future litigation.

Be Afraid – Be Very Afraid

The proactive steps outlined above will go a long way towards preventing a discrimination lawsuit, whether individual or class action. But sometimes even the most diligent of employers cannot avoid lawsuits. In light of the massive award in Novartis, class actions discrimination suits are sure to become more common. What signs should you look for to indicate you may be headed for a class action?

∙ For-Cause Findings by EEOC

Numerous charges with the same of similar allegations

∙ A pattern of irrelevant questions during management depositions

∙ Large numbers of employees asking for personnel files

∙ A significant increase in the number of internal complaints

If you observe any of these signs in your workplace, inform with your outside counsel immediately and brace for impact!

Bottom Line

No company is immune from a class-action lawsuit, and sometimes they are unavoidable. Nevertheless, taking the preventative steps and being attuned to the warning signs discussed above can significantly reduce a company’s risk of an employment class-action lawsuit.