Microsoft reaches settlement with California over alleged discrimination against its employees

Microsoft (MSFT) has reached a $14.4 million settlement with the California Department of Civil Rights over allegations that the company discriminated against employees on parental or disability leave.

The department announced today that the agreement, which is subject to court approval, means Microsoft has committed to taking broad steps to prevent future employment abuses.

“By allegedly penalizing employees who take protected leave, Microsoft failed to support workers when they needed to care for themselves or their families,” Kevin Kish, director of the California Department of Civil Rights, said in a statement. “The settlement announced today will provide direct relief to affected workers and protect them from future discrimination at the company.”

The complaint says most of those affected are women and employees with disabilities. It alleges that employees who used protected leave received lower bonuses and unfavorable performance reviews.

The agency said Microsoft “failed to take sufficient steps to prevent discrimination from occurring, altering the career trajectories of women, people with disabilities and other employees who worked at the company, ultimately leaving them behind.”

According to legal documents, a three-year investigation by the agency found that “managers made negative comments about employees' use of protected leave” and that “Microsoft's corporate culture discourages employees from using protected leave.”

Microsoft did not immediately respond to Yahoo Finance's request for comment. In court filings, the company has denied the allegations made in the lawsuit.

The complaints indicate that affected employees suffered economic harm such as lost income, lost future employment opportunities, and other non-economic damages.

Affected Microsoft employees employed between May 2017 and the date the court issues its judgment will be eligible for $14.2 million in compensation. The remainder of the compensation will be used to fund the agency's enforcement efforts.

The software giant, headquartered in Redmond, Washington, employs 6,700 people in California and about 221,000 worldwide. As a leader in the artificial intelligence boom, its stock has jumped about 35% over the past year.

Under the proposed agreement, Microsoft will hire an independent consultant to provide recommendations on the company's practices for annual employee awards and promotions. The company will also ensure that its employees know how to file complaints about discrimination. The company will be required to report its findings to the department.

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California’s civil rights agency is taking on tech giants. Last month, it reached an out-of-court settlement in a $15 million gender discrimination lawsuit against Snap (SNAP). The social media company denied the allegations in the lawsuit but said it agreed to settle to avoid a legal battle.

Last December, a landmark $54 million settlement was announced in a years-long discrimination lawsuit against video game company Activision Blizzard, which was acquired by Microsoft in October of that year.

At the time, Activision said in a statement: “We appreciate the importance of the issues addressed in this agreement and are committed to fully implementing all new obligations we have assumed under it.”

Microsoft is facing legal challenges on other fronts. Last week, the company and OpenAI were sued in Manhattan federal court by the Center for Investigative Reporting for alleged copyright infringement. The nonprofit has raised concerns about Microsoft’s significant investment in the creator of ChatGPT.

Microsoft also faces a hefty fine after the European Commission, the European Union’s competition watchdog, said last month that the company violated antitrust laws by bundling Teams with its other business apps. The company could be fined up to 10% of its $211 billion in global revenue in 2023.

Microsoft President Brad Smith said in a statement: “After unbundling Teams and taking initial steps toward interoperability, 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 journalist at Yahoo Finance. Follow Yasmin on Twitter/X @Yasmin Khorram and on LinkedInSend interesting information to Yasmin: [email protected]

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