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Microsoft Pay-Bias Pact Rescinded as DOL Sought Tougher Deal (1)

Oct. 23, 2018, 12:56 PMUpdated: Oct. 23, 2018, 4:00 PM

Microsoft Corp. and the Labor Department reached a deal to resolve an investigation finding the tech company discriminated against women on the job. Then the DOL changed its mind.

The department in July rescinded a near-done deal for Microsoft to pay an undisclosed amount without admitting to claims the company paid women less than men and passed them over for promotions, sources familiar with the investigation told Bloomberg Law. That’s because Labor Secretary Alexander Acosta was concerned the Office of Federal Contract Compliance Programs was letting Microsoft off too easy.

“In the interest of resolving a decade-old audit, we negotiated with the then-director and the current acting director of the OFCCP and reached a resolution that was in line with other recent settlements between the agency and other federal contractors,” a Microsoft spokesman told Bloomberg Law. “It’s challenging for federal contractors when the OFCCP changes its mind, but we will continue to work constructively with the agency to resolve this.”

The scuttled agreement—the department told Microsoft that OFCCP officials didn’t have the authority to finalize the deal without approval from the Labor Solicitor—has put both sides on the defensive and complicated negotiations to close the investigation without going to court, according to the sources. They spoke on condition of anonymity because they’re not authorized to discuss the case.

The dispute comes as the relatively obscure OFCCP has stepped up its role as pay sheriff in the tech and financial sectors in recent years. The office enforces a workplace discrimination ban for federal contractors like Microsoft. The company currently has 35 contracts with the federal government worth nearly $830 million, according to a Bloomberg Government analysis.

“The department follows well-established procedures with regard to compliance reviews, including not commenting on ongoing investigations,” a Labor Department official told Bloomberg Law.

The OFCCP in 2016 issued Microsoft two notices of violation, as part of a random audit of government contractors.

Investigators said they found the company paid women in engineering and other unspecified tech jobs less than their male co-workers and passed them over for promotions. Microsoft also is defending a separate lawsuit by three former employees who want to represent a class of tech workers alleging the company discriminated against them. Lawyers for those workers referenced the OFCCP’s allegations against Microsoft in court filings.

“Microsoft is committed to a diverse workforce, and to a workplace where every employee has the opportunity to succeed,” the spokesman told Bloomberg Law. The company refuted the idea that the department had offered it a low-ball deal to get out of the Labor Department investigation.

Other Tech, Financial Firms Fined

Dell Inc., a subsidiary of EMC Corp., paid $2.9 million in April following OFCCP allegations of pay bias to resolve “longstanding audits.” Palantir last year agreed to pay more than $1.6 million to settle allegations that it discriminated against Asian job applicants.

The agency’s largest compensation discrimination settlement in more than a decade came last year, when the Boston-based financial services company State Street Corp. agreed to shell out more than $5 million in back pay to settle allegations of bias against female executives.

Pay discrimination of all kinds, not exclusively in tech or the financial services sectors, was the priority for the agency under the Obama administration, Patricia Shiu, the agency’s director at that time, told Bloomberg Law.

“It’s pay throughout; we looked at pay, but we looked at pay because we should have been looking at pay all along,” Shiu said. “We looked at all pay from top to bottom, and we did it for men and women.”

Shiu said she specifically hired regional directors and other staff members who were experts in analyzing pay class actions.

The Labor Department also is involved in disputes stemming from pay discrimination investigations at Google and Oracle. A department official said in a hearing last year that investigators already had uncovered “systemic compensation disparities against women pretty much across the entire workforce” at Google’s Mountain View, Calif., headquarters.

Next Steps Unclear

The snafu over the Microsoft agreement has led to tense talks about how to resolve the investigation, but no clear path forward.

Ondray Harris, who ran the OFCCP during at least some of the investigation, told Bloomberg Law that he couldn’t discuss any probes conducted while he was at the agency. He left the role in July after eight months on the job, and was replaced by acting director Craig Leen.

Harris said OFCCP has the power to resolve investigations without input from the department’s solicitor if it happens before a lawsuit is filed. He also cautioned that just because the department finds a statistical disparity in pay and hiring data doesn’t mean there’s actual discrimination.

“When OFCCP believes it found something, you can’t take that to mean something was actually there,” Harris said. “Oftentimes, these things can go on for years and it becomes a battle of experts.”

—Jay-Anne Casuga and Porter Wells contributed to this story.

(Updated with additional reporting.)

To contact the reporters on this story: Chris Opfer in New York at copfer@bloomberglaw.com; Paige Smith in Washington at psmith@bloomberglaw.com

To contact the editors responsible for this story: Cathleen O'Connor Schoultz at cschoultz@bloomberglaw.com; Terence Hyland at thyland@bloomberglaw.com

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