In a lawsuit filed by the California Civil Rights Department (CRD), Microsoft faced allegations of systematic discrimination against employees who took legally protected leaves, such as disability, pregnancy, parental, and family caretaking leaves. These protected leaves are crucial for employees, often involving situations like serious health conditions, childbirth, or caring for a family member. However, Microsoft’s compensation policies and practices allegedly put employees who took these leaves at a disadvantage. The CRD argued that this systemically discriminated against a group of employees who were disproportionately women and individuals with disabilities.
The core of the complaint centered around Microsoft’s annual rewards system, which included bonuses, stock awards, and merit increases. To determine eligibility and the amount of these rewards, Microsoft relied on an “impact” assessment, which evaluated an employee’s contributions and performance over a fiscal year. However, the company did not consider employees on protected leave to be “actively working” during their time away. This meant that the time spent on protected leave often negatively influenced an employee’s impact assessment, resulting in reduced annual rewards, lower merit increases, and diminished opportunities for promotions. This not only financially penalized employees who took leave but also impacted their career progression within the company.
Further compounding the issue was the company’s workplace culture. The CRD’s investigation revealed that managers at Microsoft sometimes made negative comments about employees taking protected leave, fostering a culture that discouraged employees from exercising their rights. The CRD documented instances where employees who used or even requested protected leave experienced retaliation. This included being denied professional opportunities, receiving negative performance reviews, and having their performance-based compensation reduced or denied. Such actions not only violated employees’ rights but also created an environment of fear, where employees felt pressured to forgo their entitled leaves to avoid professional consequences.
The lawsuit claimed violations of several state and federal laws. Under the California Fair Employment and Housing Act (FEHA), Microsoft was accused of discriminating based on sex (including pregnancy, childbirth, and breastfeeding) and disability. The California Family Rights Act (CFRA) and the Pregnancy Disability Leave Law (PDLL) protect employees who take family care and medical leaves, and Microsoft’s practices allegedly interfered with employees’ rights under these laws. Furthermore, the CRD accused Microsoft of violating the Americans with Disabilities Act (ADA) and Title VII of the Civil Rights Act of 1964, which prohibit employment discrimination based on disability and sex, respectively.
The impact of Microsoft’s policies and practices extended beyond immediate financial harm. Employees who took protected leave suffered significant economic losses due to reduced compensation and lost promotion opportunities. The financial insecurity caused by these practices was especially harmful to employees who took leave for critical reasons, such as personal illness, pregnancy, or family caregiving responsibilities. This not only affected their ability to provide for their families in the short term but also had long-term consequences for their career trajectories. By disadvantaging those who took protected leave, Microsoft effectively limited these employees’ future opportunities for advancement within the company or elsewhere.
In addition to economic harm, the CRD highlighted the emotional and psychological toll on employees. The discrimination and retaliation fostered a hostile work environment, contributing to stress and discouraging employees from taking leaves they were legally entitled to. Employees feared the potential repercussions of exercising their rights, leading to situations where individuals might have avoided taking necessary leave to protect their careers.
To address these violations, the CRD and Microsoft reached a settlement that required Microsoft to pay $14.2 million into a Settlement Fund.