Microsoft reaches settlement with California over alleged employee discrimination

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Microsoft (MSFT) has reached a $14.4 million settlement with California’s Civil Rights Department over claims the company discriminated against employees who were on parental and disability leave. The department announced today that the settlement, which is subject to court approval, means Microsoft has pledged to take numerous steps to prevent future employment abuses. “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,” Kevin Kish, director of California’s Civil Rights Department, said in a statement. “The settlement announced today will provide direct relief to impacted workers and safeguard against future discrimination at the company.” The complaint said most of those affected have been women and disabled employees. It alleges that employees who used protected leave were given lower bonuses and unfavorable performance reviews. The agency said that Microsoft “failed to take sufficient action to prevent discrimination from occurring, altering the career trajectory of women, people with disabilities and other employees who worked at the company, ultimately leaving them behind.” According to legal filings, a three-year investigation by the agency found “managers have commented negatively on employees’ use of protected leave” and “Microsoft’s workplace culture discourages employees from using protected leave.” In an emailed statement to Yahoo Finance, a Microsoft spokesperson said the company "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.” Microsoft Chief Executive Satya Nadella speaks at the company's annual developer conference in Seattle, Washington, U.S., May 21, 2024. REUTERS/Max Cherney (REUTERS / Reuters) The complaint said impacted employees have suffered economic injuries such as lost earnings, lost future employment opportunities, plus other non-economic damages. Impacted Microsoft workers employed between May 2017 to when the court enters the judgment will be eligible for compensation from a $14.2 million settlement fund. The remainder of the settlement will go toward the agency’s enforcement efforts. The software giant, headquartered in Redmond, Wash., employs 6,700 workers in California and approximately 221,000 worldwide. As a leader in the artificial intelligence boom, its stock has jumped roughly 35% in the past year. Under the proposed settlement, Microsoft will retain an independent consultant to make recommendations about the company’s practices for workers' annual rewards and promotions. It'll also ensure its employees know how to raise complaints about discrimination. The company will be required to report its findings to the department. Story continues California’s civil rights agency is cracking down on Big Tech. Last month it settled a $15 million sex-based discrimination lawsuit against Snap (SNAP). The social media company denied the allegations in the suit but said it agreed to settle to avoid a legal battle. Last December, a historic $54 million settlement was announced in a years-long discrimination lawsuit against video gaming firm Activision Blizzard, which was acquired by Microsoft that October. At the time, Activision said in a statement: "We appreciate the importance of the issues addressed in this agreement and we are dedicated to fully implementing all the new obligations we have assumed as part of it." Microsoft is facing legal challenges on other fronts. Last week, the company and OpenAI were sued in Manhattan’s federal court by the Center for Investigative Reporting over alleged copyright infringement. The nonprofit newsroom raised concerns over Microsoft’s significant investment in the ChatGPT maker. Microsoft is also facing a steep fine after the European Commission, the European Union's antitrust authority, announced last month that the company breached antitrust laws by bundling Teams with its other applications for businesses. The company could be fined up to 10% of its global revenue, which totaled $211 billion in 2023. Microsoft President Brad Smith said in a statement, "having unbundled Teams and taken initial interoperability steps, we appreciate the additional clarity provided today and will work to find solutions to address the Commission's remaining concerns." Yasmin Khorram is a Senior Reporter at Yahoo Finance. Follow Yasmin on Twitter/X @YasminKhorram and on LinkedIn. Send newsworthy tips to Yasmin: yasmin.khorram@yahooinc.com Click here for the latest technology news that will impact the stock market Read the latest financial and business news from Yahoo Finance