Giving HR's Role a Reboot?
Microsoft lost an $11.6 million jury verdict in a complex retaliation and defamation case that experts say probably could have been prevented.
By Tom Starner
While it may sound more like a soap opera than reality, there was nothing fictional about the Texas jury verdict that earlier this month awarded $11.6 million to an ex-Microsoft top sales performer. Following a two-week trial, the jury found that the employee was retaliated against by way of bad reviews and a demotion resulting from a supervisor-induced false sexual-harassment claim.
"Basically, this is how one rogue manager can create a disaster for a Fortune 100 company," says Larry Bodine, a Tuscon, Ariz.-based lawyer and publisher of The National Trial Lawyers. "In this case, it appears that HR conspired with management and a person making a phony harassment charge. That's not how it's supposed to be. HR is supposed to be objective."
In the case, Michael Mercieca successfully sued the Redmond, Wash.-based tech giant in a defamation and retaliation case that should get human resource management's attention. Among the strange details that came out during the two-week, 600-document trial in Austin, the most pivotal one was a false accusation that Mercieca sexually harassed a co-worker.
Once that charge was made, Mercieca and his lawyers maintained that several Microsoft employees, including high-level executives -- such as Mercieca's supervisor, a woman with which he had had a romantic relationship prior to her promotion as his supervisor in 2007 -- conspired to basically run Mercieca out of Microsoft. In the end, Mercieca, a 17-year Microsoft veteran who had been a high performer, quit his job.
While requests for comment from Microsoft on the case were unsuccessful, Microsoft did tell the Austin American-Statesman that it intended to appeal the decision. It all started when a contract employee, Tracy Rummel, told Traci Auld, Mercieca's supervisor, in 2009 that Mercieca had sexually harassed her at a company dinner. He denied it and no formal complaint was made. (Auld did take the complaint to HR, but HR decided that because Rummel was a contractor, it had no standing to pursue the complaint, according to court records.)
Soon thereafter, things got rough in the workplace for Mercieca, his lawyers contended. In fact, Mercieca believed he was being singled out, according to court records. He found himself excluded from customer events and conferences, his expense budget was lowered, his vacation requests were questioned and he was cut off from customer communications, according to the suit. Mercieca's lawyers even contend that two top Microsoft sales executives tried to get negative feedback about him by calling his customers.
In 2010, Mercieca apparently had enough. He contacted Microsoft HR to ask why he was being mistreated. He was told he was not being investigated, but filed a complaint himself with Microsoft HR, claiming he was the victim of retaliation and discrimination.
According to Mercieca's attorneys, within a couple of days of his complaint, his management team began looking for ways to get Rummel (now a full-time Microsoft employee) to file a sexual-harassment complaint against Mercieca. She filed it, but oddly, her complaint said the harassment took place in 2008, not at the 2009 dinner. In the end, Microsoft HR found Rummel's and Mercieca's complaints both unwarranted. But the damage was done, according to Mercieca's lawyers and, of course, the jury.
While the case is complex, and almost beyond belief, employment lawyers say it's obvious a key HR process was not working the way it should.
"It seems like an outlier," says Sandra Girifalco, a partner at Stradley Ronon, a Philadelphia law firm. "The facts based on the reports of the trial are hard to believe, but in the end, the jury certainly believed them."
Melissa Goodman, a partner in Haynes and Boone's Dallas office, and former head of the firm's labor and employment group, also use the term "outlier" to describe this case.
"It looks like a scenario where the right people were not informed," she says. "You will see times where the corporation learns about situations they were not made aware of early enough. For example, a report is not escalated.
"What I don't understand is the allegations that all those managers were also involved in trying to derail someone and the made-up complaint of sexual harassment," she says. "Clearly, some allegation made the jury very mad. They believed that some of the employees were intentionally to trying to sabotage the plaintiff."
Both Girifalco and Goodman say no matter how the case ends up -- on appeal, lowered award, post-verdict settlement, etc. -- it's a prime example of how critical an investigation into a complaint is for an employer in general and HR in particular.
Girifalco says investigations into allegations like these needs to be done by a trained, experienced and independent professional. There is no wiggle room.
"Whenever an employee complains about harassment or discrimination, a full-blown investigation must be started immediately, no matter how silly the claim might seem on the surface," she says. "An investigation has to stand legal scrutiny. They are neither routine nor easy. You have to be objective, and be able to ask the tough questions so you can determine credibility."
She says when allegations include senior management or star performers, it can be especially difficult to get at the truth.
"Employees many stick together and lie for each other," she says. "Also, they might sidestep questions for fear of retaliation. As you might guess, it's a lot easier to dodge the truth in a conference room than it is in a courtroom in front of a jury."
Girifalco also says employers must be very careful about office romances. For example, did Microsoft know they were putting an employee in a supervisory role with her former boyfriend?
Goodman says that for her, the biggest issue from what she has read of the trial is you can't tell if a thorough, bona fide investigation was even done.
"It seems like the issue was localized, not escalated to global HR or out of that office," she says. "I looked at the plaintiff lawyers' petition and I can't tell. For example, who does that HR person report to? I don't know enough and don't know the HR reporting structure in this case."
Goodman speaks a lot on retaliation cases, which are on the upswing, and she says every local HR office needs to know when escalating a claim is appropriate.
"I always worry about the local or regional office," she says. "Of course, in this case what may have made the jury really mad was the high level of management people involved."
As an employer, she says, you must have an effective system in place to get those reports to the appropriate level, and then it's very important who will conduct the investigation. It has to be someone who can handle a proper investigation, who knows how to question witnesses.
Goodman says the emerging breeds of retaliation cases are not as clear-cut as they may have been in the past. In fact, she points to some of the behaviors alleged in this case -- isolation, budget cuts, etc. -- as the type of behaviors that are very hard for employers to manage.
Finally, both Girifalco and Goodman say this case might be the perfect "how not to" train case study for handling complex retaliation cases.
"Supervisors need to be trained, most of all," says Goodman. "If ever there was a case on why it's important to do a proper investigation, this is it."
"This is a great case for training," Girifalco says. "You have to train employees and managers in issues of discrimination and harassment. You have to keep vigilant about inappropriate comments and behavior, even if it happens only one or two times."
It's very important for supervisors to know what to do if they get a report of harassment, Girifalco says.
"At that point, it might be a good idea for someone else in HR who is not as close to it to be involved. In some extreme cases, it might require the legal department or even a neutral third party from outside the company," she says.
While there are reports that statutory caps will reduce the final award in Texas, Goodman says she's not certain about that. While caps do exist in Texas, it may not be subject to those caps because there are defamation claims made. News reports say the judge in the case is expected to rule on damages within a month's time.
"This case proves that, in these situations, HR must be independent of management," Bodine says. "HR has got to be the credible arbiter of internal complaints. Of course, step one certainly is not joining a conspiracy. In this case, HR did a horrible job. It should have recognized that the employee was in a hostile workplace.
"It was a total collapse of the HR process, and this is according to the evidence brought out in the trial, not my opinion," he says.