The $192 million settlement between Coca-Cola Co. and its salaried African American employees is the largest ever in a racial discrimination case, exceeding the $176 million racial discrimination judgement against Texaco Inc. in 1997. But it may not hold the record for long.
“The number of lawsuits dealing with employment claims in the United States will continue to rise until there is a fundamental tort reform,” warns Michael J. Lotito, Chairman for the Society for Human Resource Management. “Companies that lack sufficient policies, internal problem solving mechanisms, and ongoing training for managers and supervisors are essentially putting a bull’s eye on their foreheads with a sign that says, ‘sue me.’”
As the Coke settlement demonstrates the cost is already high, but corporate America’s price tag could soon grow to astronomical proportions.
Consider that Coke is still the target of yet another discrimination complaint — this one from four women African American employees, who are seeking $1.5 billion dollars in damages.
Coke is hardly alone. The soft drink giant’s company in the penalty box includes software behemoth, Microsoft Corp.
On October 4, the software firm was hit with a federal class action lawsuit that has a potential liability of billions of dollars. The complaint involves over 400 African American employees and 4,500 female employees who allege the company routinely discriminates against minorities.
“This case could be of monumental importance, particularly because of the stock options involved,” says Steven Toll, an attorney with Cohen, Milstein, Hausfeld & Toll who is representing the plaintiffs. Toll is something of a seasoned veteran at complaints of this sort. His firm also represented the plaintiffs against Texaco.
In contrast to the Coca-Cola and Texaco lawsuits, which primarily involved disparity in hiring, promotions, and compensation, the Microsoft plaintiffs allege that, in addition to those disparities, Microsoft failed to grant these employees a fair amount of stock options.
“Depending on what options they missed out on, each person could be owed hundreds of thousands or even millions of dollars” says Toll. Consider that there are some 5,000 plaintiffs in the case: Microsoft may have $24.5 billion in cash and short-term investments, but it won’t last very long if the plaintiffs find a sympathetic jury.
But Microsoft didn’t get to be the kingpin of the software world without learning a thing or two about bare knuckles tactics, and it is sure to use every means at its disposal to ward off this assault.
For his part, Toll says the litigation could take up to two years.
At this stage of the game, it’s too early to put an exact dollar figure on Microsoft’s potential damages, but the plaintiffs would like more than just a big fat check.
“Clearly,” says Toll, “what we would like to effectuate is a real change in policy, a change in the system being an important part of any result of the case.”
As part of its settlement, Coke did agree to a change in policy. The company made changes in employee training, monitoring, and mentoring worth an estimated $36 million.
The Coke settlement established a task force comprised of seven members, three appointed by the plaintiffs’ counsel and three by the company. Both sides have to agree on the panel’s seventh member.
The panel will have the power to review Coke’s human resources policies and the company’s adherence to the settlement. To sidestep any of the task force’s recommendations, the company will have to prove that following the proposed step is not financially or technically feasible.
Coke is also obligated to hire an ombudsman who will independently monitor the handling of complaints by the company’s human resources department. The company will also hire industrial psychologists who will independently review Coca-Cola’s human resource practices.
The settlement also calls for Coke’s board of directors to oversee the company’s overall compliance with federal Equal Employment Opportunity Office guidelines.
In addition to the programs and policies about to be implemented by Coca-Cola, Lotito also said companies could benefit from a “peer review” panel of employees. The panel would “evaluate the circumstances that led to an employee discharge, and perhaps, depending on how the program is designed, have the power to overrule the decision of management.”
“In any organization today, it is inevitable that employees are going to have problems on the job,” says Lotito. “The company has to be able to deal with this inevitability either through internal or external resolutions. This is why zero tolerance policies, well-trained supervisors, and internal problem-solving mechanisms respected by the organization, such as an ombudsman, make a lot of sense.”