Novartis Pharmaceuticals Corp (NYSE:NVS) has agreed to pay $99 million to settle a lawsuit by current and former sales representatives who claimed they were denied overtime pay despite working more than 40 hours per week.
The settlement resolves a 2006 lawsuit covering about 7,700 plaintiffs who have worked for Novartis Pharmaceuticals, an affiliate of Switzerland-based Novartis AG, the law firm for the plaintiffs said.
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The settlement follows a July 2010 ruling by the 2nd U.S. Circuit Court of Appeals in New York that the workers qualified for overtime under the federal Fair Labor Standards Act.
The U.S. Supreme Court is likely to address the same issue after another federal appeals court said similarly situated workers at a unit of Britain's GlaxoSmithKline Plc were not entitled to overtime pay.
Andre Wyss, president of Novartis Pharmaceuticals, in a statement said that while the company believes it pays workers in accordance with applicable federal and state laws, "it is time to resolve these wage and hour claims."
U.S. District Judge Paul Crotty in Manhattan on Tuesday granted preliminary approval to the $99 million settlement, a sum that includes attorneys fees of as much as 30 percent, court records show.
A hearing to grant final approval is scheduled for May 31.
Novartis Pharmaceuticals is based in East Hanover, New Jersey.
The Supreme Court agreed in November to review a decision by the 9th U.S. Circuit Court of Appeals in California that classified the Glaxo sales representatives as "outside sales" personnel exempt from the FLSA overtime pay requirement.
If the Supreme Court upholds that February 2011 decision, in the case Christopher v. SmithKline Beecham Corp, it would mean that no overtime pay was owed.
"The risks of further litigation are great," David Sanford, a partner at Sanford Wittels & Heisler representing the Novartis plaintiffs, said in an interview.
"If the Supreme Court rules that the outside sales exemption applies, then all of this litigation is over," he added.
Novartis declined to elaborate on the settlement.
The Novartis plaintiffs include various sales representatives who worked for the company between 2002 and 2007, and from Jan. 25, 2009, to the present.
Sanford said payouts will vary based on length of employment and compensation, and on how many plaintiffs choose to take part in the settlement.
His firm also reached a $175 million settlement with Novartis in July 2010 to resolve claims of bias against 5,600 sales representatives.
The case is In re: Novartis Wage & Hour Litigation, U.S. District Court, Southern District of New York, No. 06-md-01794.