Microsoft settles with California over alleged employee discrimination

Microsoft to Pay $14.4 Million Settlement Over Discrimination Allegations

Microsoft has agreed to a $14.4 million settlement with California's Civil Rights Department, resolving claims that the company discriminated against employees who took parental and disability leave. The settlement, which awaits court approval, requires Microsoft to implement measures to prevent future employment abuses.

California's Civil Rights Department highlighted that Microsoft's practices allegedly penalized employees for taking legally protected leaves. Director Kevin Kish stated that by discriminating against employees who needed to take such leave, Microsoft failed to support them in crucial times.

The complaint noted that women and disabled employees were predominantly affected. It detailed how taking protected leave resulted in lower bonuses and unfavorable performance reviews for these employees. The agency criticized Microsoft for not taking adequate steps to prevent discrimination, which adversely impacted the career paths of those employees.

The conclusion arose from a three-year investigation, which revealed that managers often criticized the use of protected leave, contributing to a workplace culture that discouraged it. In response to the allegations, a Microsoft spokesperson stated that the company is dedicated to creating an environment that supports employees' needs for leave while fostering their professional and personal growth. Microsoft also expressed disagreement with the agency's claims but emphasized its commitment to continuous improvement.

Affected employees have reportedly experienced economic setbacks, including lost earnings and future job opportunities, and have also endured non-economic damages. Workers employed by Microsoft between May 2017 and the court's judgment date will be eligible for compensation from the $14.2 million settlement fund, with the rest allocated to the agency's enforcement efforts.

Microsoft, headquartered in Redmond, Washington, employs 6,700 workers in California and approximately 221,000 globally. Despite the legal challenges, the company's stock has surged by roughly 35% in the past year, bolstered by its leadership in the AI field.

Committal to Changes and Accountability

Under the settlement, Microsoft will hire an independent consultant to review and suggest improvements for its employee rewards and promotion practices. The company will also ensure that employees know how to report discrimination and will be required to share its findings with the Civil Rights Department.

California's Ongoing Scrutiny of Big Tech

This settlement is part of California's broader initiative to address discrimination in Big Tech companies. Last month, the Civil Rights Department settled a $15 million discrimination lawsuit against Snap, following a similar pattern of resolving disputes without admission of guilt to avoid protracted legal battles. Additionally, a $54 million settlement was reached last December in a lengthy discrimination case against Activision Blizzard, now a Microsoft subsidiary.

Ongoing Legal Challenges

Microsoft faces other legal challenges as well. The company and OpenAI were recently sued for alleged copyright infringement in Manhattan's federal court. Moreover, the European Commission, the EU's antitrust authority, is considering a significant fine against Microsoft for bundling Teams with other business applications, a decision that could cost the company up to 10% of its global revenue, which was $211 billion in 2023. Microsoft President Brad Smith acknowledged the concerns and committed to finding solutions.