Why did Microsoft settle $14 million lawsuit over employee leave retaliation?

Microsoft Lawsuit: Microsoft Corp has agreed to pay $14 million to settle claims by the California Civil Rights Department that it illegally penalized workers who took medical or family-care leave. According to the agency, Microsoft allegedly retaliated against California-based employees who used parental, disability, pregnancy, and family-care leave since 2017 by denying them raises, promotions, and stock awards. These workers, who were disproportionately women and people with disabilities, received lower performance review scores that impacted their pay and career advancement.

The settlement, pending approval by a state judge, would resolve a multiyear investigation by the Civil Rights Department. Although Microsoft denied any wrongdoing, a company spokesperson stated, "Microsoft is committed to an environment that empowers our employees to take leave when needed and provides the flexibility and support necessary for them to thrive professionally and personally."

The California Civil Rights Department has announced several large settlements in recent years, including a $100 million deal with Riot Games in 2021, a $54 million settlement with Activision Blizzard last year, and a $15 million settlement with Snap last month. The agency accused Microsoft of sex and disability discrimination and interfering with workers' rights to take leave.

The exact number of workers who could benefit from the settlement is unclear. According to court filings, Microsoft, headquartered in Redmond, Washington, employs about 6,700 people in California. Kevin Kish, the director of the Civil Rights Department, commented, "Microsoft failed to support workers when they needed time to care for themselves and their families."

What is the matter?

The California Civil Rights Department (CRD) filed the lawsuit in Santa Clara County Superior Court, alleging that Microsoft penalized workers, particularly women and people with disabilities, for taking protected leave. According to the CRD, these employees received lower performance ratings from supervisors, making them less likely to receive promotions or salary increases. Additionally, they were not credited for working while on leave, which affected their annual bonuses based on work time.

While Microsoft did not admit to any wrongdoing, it agreed to compensate the affected employees and hire an independent consultant to review and ensure compliance with the settlement and to implement changes in the company’s practices. If approved by a judge, the settlement will provide compensation to California workers who have taken leave since May 2017 for reasons including disability, illness, or family care.

“Whether it’s to look after a newborn child or take care of your health, workers generally have the right to take time off without worrying about consequences at work,” said Kevin Kish, director of the Civil Rights Department, in a statement. “By allegedly penalizing employees for taking protected forms of leave, Microsoft failed to support workers when they needed to care for themselves or their families. The settlement announced today will provide direct relief to impacted workers and safeguard against future discrimination at the company.”

Microsoft spokesperson Sarah Naciri responded, saying, “Microsoft is committed to an environment that empowers our employees to take leave when needed and provides the flexibility and support necessary for them to thrive professionally and personally. While we believe the agency’s allegations are inaccurate, we will continue to listen, learn, and support our employees.”

Based in Redmond, Washington, Microsoft has offices in 14 California communities, including San Francisco, Palo Alto, and Mountain View, employing a total of 6,700 workers.

Under the settlement, any employees who have worked at Microsoft for at least 90 days since May 2017 and took time off under the company’s “protected leave” program—covering parental leave, family caretaking, pregnancy, and disability leave—will be eligible for compensation. Additional benefits will be available to those who can demonstrate they were penalized for taking leave, said Civil Rights Department spokesperson Rishi Khalsa.

The company has also agreed to collaborate with the independent consultant to ensure employees are informed about how to file complaints of discrimination or retaliation for taking leave, to train managers on anti-discrimination policies, and to report annually to the consultant on compliance with the settlement.

With Reuters Inputs