Microsoft Racial Bias in Promotions, Pay Alleged in $5 Bln Suit

01/03 17:51
Microsoft Racial Bias in Promotions, Pay Alleged in $5 Bln Suit
By Anna Marie Stolley

Washington, Jan. 3 (Bloomberg) -- Microsoft Corp. discriminates against its black workers in pay, promotions and hiring, seven former and current employees of the world's largest software maker allege in a lawsuit that seeks $5 billion in damages.

Jozette Joyner, a black employee in the software giant's Washington, D.C. office for 2 1/2 years, says she sought promotion every six months only to see less experienced white co-workers advance. Joyner says a supervisor told her: ``You'll never get out of this cubicle.''

Joyner's experience wasn't unique, says Willie Gary, the lawyer representing the employees, who described Microsoft's attitude as ``plantation like.'' Gary filed an amended complaint today in federal court in Washington, D.C., adding new plaintiffs to the case brought last summer and requesting class-action status on behalf of all black Microsoft workers in the U.S. since April 1992.

``We have situations on the job where people are dehumanized, the `N' word is used by supervisors,'' Gary said.

``Microsoft, under no circumstances, tolerates discrimination in its employment practices and the company takes any allegations of discrimination seriously,'' said spokeswoman Ginny Terzano. She said company officials hadn't seen the amended complaint and had no further comment.

Microsoft shares rose $4.56, or nearly 11 percent, to $47.94, the biggest single-day gain since Oct. 19. The company's shares were the seventh most actively traded in the U.S. today.

``Investors seem to look past it,'' said Scott McAdams, chief executive of Seattle-based McAdams Wright Ragen Inc., who has covered Microsoft for more than a decade. ``It is just so far down on the list of things that people are concerned about with Microsoft.''

Microsoft investors ``have already been through the worst'' and the lawsuit is ``not material in terms of earnings or revenue,'' said Christian Koch, an analyst at Trusco Capital Management, which holds Microsoft shares.

Judge's Impartiality Challenged

The discrimination suit has been assigned to U.S. District Judge Thomas Penfield Jackson, who ruled last summer in a government antitrust case that Microsoft illegally defended its monopoly on Windows -- the software that operates 95 percent of the world's personal computers -- and should be split. The order is being appealed.

In its appeal, Microsoft has challenged Jackson's impartiality and urged his disqualification from further proceedings in the case. Jackson has said he would ``think very seriously'' about taking himself off the case if the appeals court found his decision was ``egregiously wrong.''

Microsoft's lawyers are probably weighing whether to file a motion to disqualify Jackson, said Rex Perschbacher, dean of the University of California at Davis Law School and a professor of civil procedure and professional responsibility.

``Federal judges are very reluctant to disqualify themselves and such requests are likely to be denied,'' Perschbacher said. ``You put yourself in a bind because you've told the judge you're more annoyed with him than he may have thought. However, Microsoft may not have that much to lose here.''

Few Black Managers

Microsoft says the number of blacks it employs has risen 81 percent since 1997, an increase that has outpaced the overall growth of the company's workforce. Of Microsoft's 26,700 employees, the company says 717, or fewer than 2.7 percent, are black. The lawsuit claims 1.2 percent of the company's managers are black.

The suit says Microsoft engaged in a ``pattern and practice'' of racial discrimination in performance evaluations, pay, recruitment and hiring at offices in Washington D.C. and Washington state.

``When you come to work every day and you are being told no matter how hard you work, you're not going to make it, you take these frustrations home with you,'' said Tanya D. Barbour, a former administrative assistant at Microsoft's office in Washington, D.C.

In addition to claims that blacks were denied promotions and equitable raises, the plaintiffs claim managers sometimes harassed and verbally abused black employees. One plaintiff says she was demoted for filing a complaint of discrimination with the company.

Gary said the practices alleged in the lawsuit contrast with charitable giving by the company and its top executives to programs that benefit minorities. ``The world needs to know that Microsoft is not the company it purports to be,'' Gary said.

`Peanuts'

Gary said the suit seeks compensatory and punitive damages of $5 billion. ``In a real sense, what's $5 billion to Microsoft?'' he said. ``Probably peanuts.''

John Irving, an employment law attorney at Kirkland & Ellis, said the damages sought are ``astronomically high.''

``It is well beyond anything that comes to mind in a discrimination case against a corporate employer,'' he said.

Perschbacher said Microsoft must be prepared to face potentially costly discrimination claims, like any other major U.S. company.

``There is nothing unique about high-tech businesses that makes them immune from having instances, perhaps, or claims of racial discrimination,'' he said. ``This company is not so dramatically different than anything that has come before.''

Large Awards

Gary, a trial lawyer from Stuart, Florida, has battled Coca- Cola Co., the Walt Disney Co. and Diageo Plc's Burger King in recent cases, sometimes winning large jury awards and settlements.

In August, Gary and attorney Johnnie Cochran won a $240 million verdict against the Walt Disney Co. for two men who claimed the entertainment giant stole their sports-theme park idea. Gary said his clients are negotiating a settlement with Disney that would avoid a lengthy appeal.

Gary also won a $500 million jury award -- later reduced to $175 million in a settlement -- against a funeral home operator in 1995. He represents four plaintiffs in a discrimination suit against the Coca-Cola Co. Gary's clients, who were dropped from a case the world's leading soft drink company settled, have yet to go to trial.