Novartis Sex Discrimination Ruling is Bad News for Wal-Mart

The jury's decision on Monday that Novartis Pharmaceuticals was guilty of sex discrimination does not bode well for Wal-Mart (WMT). A dozen female sales representatives argued about their futile efforts to advance at a company that favored men, when it came to pay and promotion. The jury listened and awarded them $3.3 million in compensatory damages and slapped the company with $250 million in punitive damages.

Novartis Pharmaceuticals, a US subsidiary of Novartis AG (NVS) and the manufacturer of such drugs as Ritalin, Excedrin and Bufferin, strongly disputes the claims of past discrimination.

"We are all very gratified that the jury took what we see as a clear and decisive stand for the rights of working women everywhere," says attorney Kate Kimpel of Sanford, Wittels & Heisler who was one of the lead counsels who represented the plaintiffs. "It sends a very clear message to Novartis and corporations around the country that the American people will not stand for discrimination against their wives, mothers, daughters and sisters in the working world."

Novartis expressed its disappointment in the jury's verdict. "For more than ten years the company has developed and implemented policies setting high standards with regards to diversity and inclusion for the development of our employees," said Andy Wyss, Head of Pharma North America and President of Novartis Pharmaceuticals Corporation, in a statement released by the company. "NPC is proud of and remains committed to its diversity efforts."

Consequences for Wal-Mart

The jury's verdict, in addition to the compensatory and punitive damages, sends a strong message to Wal-Mart, which is facing its own sex discrimination case. "Juries do not look kindly on American woman being deprived of the earnings that would come of their hard work and of the right to make a career free of discrimination," says Kimpel.

The Wal-Mart sex discrimination lawsuit, which has been tied up in the legal system since June 2001, is considered the largest civil rights class action in U.S. history.

In late April, the U.S. Court of Appeals for the Ninth Circuit ruled in a 100-page decision that hundreds of thousands of female Wal-Mart current and former employees who have worked at Wal-Mart stores at any time since June 2001 are entitled to proceed with a massive class action lawsuit against America's largest retailer.

The case (Dukes v. Wal-Mart Stores, Inc..) alleges systematic discrimination against women in compensation and promotions at Wal-Mart and its subsidiary, Sam's Club, throughout the United States. The opinion rejected Wal-Mart's argument that the case was too large to be a class.

The case has been bolstered by Wal-Mart's own records. Although more than two-thirds of Wal-Mart's hourly employees are female, the records showed that women represented fewer than one-third of lower-level managers, and only 15% of store manager positions. In addition, women were allegedly paid less than men of equal seniority in every major job category, even though women on average had higher performance ratings and lower turnover rates than men.

"We do not believe the claims alleged by the six individuals who brought this suit are representative of the experiences of our female associates," said Jeff Gearhart, Executive Vice President and General Counsel for Wal-Mart, in a statement. "Walmart is an excellent place for women to work and fosters female leadership among our associates and in the larger business world."

The Wal-Mart trial is expected to commence within a year.