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Sex bias class action challenging Microsoft pay and promotion processes not certified

By Kathleen Kapusta, J.D.

Two Microsoft employees who sued their employer for sex discrimination under Title VII, and who sought to certify a proposed class of more than 8,600 women nationwide, failed to affirmatively show that common questions of law or fact existed across the proposed class, that their claims were typical of the absent class members’ claims, or that they would fairly and adequately protect the interests of the class, a federal district court in Washington ruled. The employees, who alleged that as a result of Microsoft’s employment policies and practices female technical employees received less compensation and were promoted less frequently than their male counterparts, asserted both disparate impact and disparate treatment claims. Denying their motion for class certification, the court directed the clerk to provisionally file the order under seal and ordered the parties to meet and confer regarding the need for redaction. In a subsequent order, it held that the bulk of the decision could be filed publicly with one exception concerning discrete portions that reveal certain information regarding ongoing OFCCP proceedings (Moussouris v. Microsoft Corp., provisionally filed June 25, 2018, under seal and filed publicly July 5, 2018, Robart, J.).

According to the employees, Microsoft’s method of ranking its engineering and technical employees led to arbitrary differentiations between them, and the inaccurate performance measurements systematically disadvantaged women in compensation and promotions. The employees’ proposed class consisted of female employees in Stock Levels 59-67 working in Engineering and/or I/T Operations Professions from September 16, 2012, to the present. Stock Levels, also known as Pay Levels, represent compensation ranges relative to the “Professions” Microsoft employs and the markets in which it works. Stock Levels range from 59 to 98, and pay increases as the Stock Level increases.

Calibration meetings. The employees challenged a specific aspect of Microsoft’s employee evaluation process: the Calibration process during which managers compared and standardized employees’ performance ratings across a cohort of similarly leveled colleagues. From 2011 to 2013, the process focused on the results achieved by the employee and how he or she achieved those results. Microsoft used a companywide “stack ranking” system that ranked its technical employees from best to worst using a performance rating from 1 (best) to 5 (worst). It applied a curve so that only a certain percentage of employees in each “defined peer group” could attain each rating. It applied this curve by holding biannual “calibration meetings” at which managers assessed three factors: the results an employee obtained, how the employee obtained those results, and whether the employee had a history of continuing to develop his or her capabilities.

At the calibration meetings, managers “presented the merits of their own employees and attempted to discredit the merits of the other [managers’] employees.” Following calibration meetings, the “calibration owner,” who oversaw the managers, resolved the order of the stack for all employees discussed in a given meeting. A higher-level manager then performed a final review of the calibration owner’s rankings before finalizing the stacks. In 2014, Microsoft transitioned to a new system, called “people discussions,” which the employees characterized as similar to the prior stack ranking system.

The two employees, along with nine other employees who filed declarations, alleged that Microsoft excluded them from business opportunities and applied double standards, rooted in gender stereotypes about behavior, to dictate how female employees should behave. They also alleged that Microsoft had a culture of hostility toward women and that female employees who complained faced retaliation.

Disparate impact commonality. In opposing class certification, Microsoft first challenged commonality. Noting that disparate impact claims under Title VII challenge “a facially neutral policy or practice that causes a disparate impact on a protected group, even if the employer has no intent to discriminate,” the court observed that Wal-Mart Stores, Inc. v. Dukes directly addressed the issue of commonality in Title VII gender discrimination cases that challenged the discretion exercised by individual supervisors over pay and promotion matters. Post-Dukes, said the court, the crux of the commonality inquiry for a system of discretion lies in whether lower-level supervisors operate under “a common mode of exercising discretion”—put differently, whether some company-wide policy provides sufficient “common direction” such that individual exercises of discretion nonetheless produce a common answer to the question “why was I disfavored.”

Here, the court found the employees failed to show their disparate impact claims depended on a common contention, the determination of which would resolve an issue central to the validity of each class member’s claim. The employees’ proposed class of 8,600 women covered a myriad of positions ranging from software engineers to game designers to data scientists, with even more varied responsibilities within those positions. In addition, the putative class members were located all over the country.

“Framework,” not “constraints on discretion.” Further, said the court, the procedures Microsoft dictated acted more as a framework than as constraints on discretion as the process by which managers made decisions was largely left up to those managers. While they had to hold a calibration meeting, how they ran that meeting, and thus how they came to their decisions, was entirely discretionary. In addition, the company’s general criteria did not sufficiently constrain discretion. Instead, its benchmarks were subjective and open to many interpretations. And after it transitioned from calibration meetings to people discussions, its evaluation criteria became even less concrete. Noting that managers evaluate the impact a particular employee’s performance had on the group and the company, the court found it hard to imagine a criterion more susceptible to individual interpretation than the subjective measure of a person’s impact.

Nor did the employees show sufficient involvement by top management. While they identified four executive vice presidents as the final approvers of all pay and promotion decisions, the evidence showed that these executives almost always accepted the recommendations of lower-level managers. And the employees’ expert reports were of no assistance, said the court, pointing out that rather than identifying sufficient common discretion, the expert emphasized the exact opposite: the “lack of standardization in how factors are evaluated and the lack of standardization in the process itself.” Further, the proferred declarations reflected how Microsoft managers did not exercise their discretion in a uniform manner. Not only did the declarants concede that while some managers exercised discretion in a discriminatory manner, others did not, and their experiences varied and were based on a number of different policies or practices.

In sum, said the court, “As in Dukes, without some common direction, it is ‘quite unbelievable’ that all Microsoft managers supervising over 8,600 putative class members ‘would exercise their discretion in a common way.’” Accordingly, the court found that commonality was lacking for the employees’ disparate impact claims.

Disparate treatment commonality. As to disparate treatment commonality, the employees failed to show that promotion policies and practices were uniform across Microsoft. The relevant level of decision-making for the challenged practices here remained at the individual manager, or at best, the team level. Not only was their statistical evidence insufficient to show any common issue that would permit a nationwide class, their anecdotal evidence was too weak to establish that the entire company operated under a general policy of discrimination, said the court, noting that they offered nine declarations for 8,630 class members. Moreover, the anecdotal evidence related to only five of the 41 states in which Microsoft has offices and did not represent all the Stock Levels in the class. As to culture evidence, the employees offered at most a glimpse into individual incidents that were not sufficiently representative of the entire culture across Microsoft. On the whole, they failed to provide significant proof of Microsoft’s general policy of discrimination necessary to demonstrate commonality in their disparate treatment claims.

Typicality. While the employees argued that their claims were identical to those of all the other class members because they “[have] been paid less than comparable male coworkers” and were passed over “for promotions in favor of less qualified and less experienced men,” the court found they failed to establish typicality with respect to their disparate impact and treatment claims. Specifically, they failed to show that “other class members have been injured by the same course of conduct.” Here, the court noted that while some individual class members may want to argue that their initial performance rating was flawed, others may want to argue that their accomplishments were not adequately represented in the calibration meeting or people discussion. In addition, others may have substantial evidence that their particular manager was biased, while some may have no qualms with their initial performance rating, the first calibration meeting, or their direct manager, but wish to challenge how successive discussions unfolded in the roll-up process. In short, given the discretion-based system, the individualized inquiry will vary for each plaintiff, foreclosing any contention that the named plaintiffs’ claims are typical, said the court.

Adequacy. Finally, turning to adequacy, the court, agreeing with Microsoft, found that because the proposed class included female employees who participated as managers in the Calibration Process—the very process being challenged—the employees must “impugn[] the input of thousands of class members who participated in calibration.” Here, 2,126 putative class members were managers at least once during the class period, and 3,457 members were either leads or managers; 472 qualified as “managers of managers.” As a result, a “significant number of potential class members” here participated in the very system and the very decisions that were alleged to be discriminatory. Because the employees’ disparate impact and disparate treatment claims stemmed directly from the system that many putative class members—including a named plaintiff—took part in, the class “include[s] both those who implemented the ratings system and those who allegedly suffered under it,” said the court, noting that “[t]his conflict appears insurmountable.”