How a bruising Microsoft lawsuit fueled the fight for fair pay

After a bruising lawsuit with Microsoft, Katie Moussouris is fighting for fair pay

When she thinks of pay equity these days, Katie Moussouris thinks of her mother Anuncia.

“The fact that she was never, ever paid what she was worth impacted every single aspect of our life,” Moussouris says. “She died before she could even retire, 10 years ago in June.”

An indigenous Chamorro woman from an island just north of Guam, Anuncia worked as an infertility specialist, researching in vitro fertilization and stem cell techniques. Part of her work meant training other doctors, many of whom went on to far more lucrative practices on their own. Anuncia was left to make ends meet on far lower wages as a single mother.

“Pay inequity hurts families,” Moussouris says, “And in my case, I really do feel like my mom should have been able to retire and take it a lot easier earlier in her life, and she might still be with us.”

Moussouris has carved a better path for herself, climbing the ranks at Symantec, Microsoft, and HackerOne, establishing herself as a pioneer of the bug bounty model and founding her own company, Luta Security. But while she’s risen in the cybersecurity world, she’s never forgotten her mother’s experience — and she’s now using her hard-won power to do something about it. After a bruising five-year lawsuit against Microsoft, Moussouris is now taking on the pay equity problem, starting with a nonprofit foundation and a new center at Penn State Law. The goal of the foundation is to urge companies into conducting audits and taking action on their own. If they don’t, the law center will push for new laws and legal precedents that will make it easier for employees to hold them accountable in court.

“We are trying to achieve pay equity across all genders and races in the world in our lifetime,” she says. “As in right now.”

The problem is much bigger than a single woman or a single job. An Economic Policy Institute study from 2016 estimated that women are paid 83 cents for every dollar men make, comparing over hours worked. For Black women, the number falls to 63 cents on the dollar. The disparity gets worse for older workers and more skilled jobs, deepening over time. As pay equity activists see it, the change is gradual, beginning with a slightly lower salary on hiring, a slightly tougher path to promotion, until it’s broad enough to make a visible dent in the way a society’s wealth is distributed.

That pay gap has been a growing source of tension in tech companies. Women continue to be hugely outnumbered on engineering teams and face a particularly steep pay gap early in their careers, even as executives tout commitments to diversity. In some instances, the disparity has cohered into specific legal claims. In 2018, Uber agreed to pay $10 million to women and people of color working for the company after a state-level pay equity suit. Google is currently litigating a similar case, filed in the wake of the Google walkout.

Moussouris’ lawsuit against Microsoft was filed years before those cases, and while it failed, she sees it as a kind of test case for pay equity claims in the industry. Not everyone sees it that way: reached for comment, a Microsoft representative said the lawsuit was groundless, while emphasizing the company’s commitment to pay equity. “Ms. Moussouris chose to drop her case, which we have always believed to be without merit, after the trial court and the Ninth Circuit rejected her attempts to frame it as a class action,” the representative said.

Free of any nondisclosure agreement, Moussouris is unusually candid about her experiences at Microsoft, which she sees as a kind of test case for how big employers can keep women’s salaries low. She arrived at the height of Steve Ballmer’s tenure as CEO, before Satya Nadella pushed the company toward a more humane workplace culture. For Moussouris, the issues began even before she took the job. Her hiring manager asked her previous salary during the interview, a practice that has since been outlawed in Washington state for perpetuating pay disparities. More damaging, he convinced her to take a lower job title; she had been a principal at Symantec, but her entry title at Microsoft would be “security strategist,” a significantly lower rank.

“Their justification at the time was, ‘Microsoft is different, our bar is so much higher, we don’t want you to get a mediocre review out of the gate,’” Moussouris says. “It didn’t occur to me that it was going to be several years before I could even approach principal again.”

Moussouris did well at Microsoft, pioneering the company’s bug bounty program and building a reputation as a leading voice in corporate cybersecurity. She got good scores on her performance reviews and was promoted twice over her seven years at the company — but she found it a difficult place for women to work. She remembers a senior director in her division, who had a habit of acting inappropriately with female co-workers, giving unwanted back massages or sending emails about his tantric number. In one incident, she remembers him announcing to her team’s open office that it was “steak-and-a-blow-job day.”

“I think he got the memo that he’d better not try anything like that with me,” she says, “but he was doing it to my staff.”

She put in for a transfer and confronted him about his behavior in a formal interview as she left. Later, the company’s HR team got involved, although it’s unclear how the investigation resolved. As she recalls it, the investigation didn’t slow him down. Moussouris kept scoring high on her performance reviews, but in the next round of annual bonuses, her award was less than she expected. She began to think the senior director might have lowered it.

The events of that last year at Microsoft have been chewed over endlessly in the lawsuit, and many of the allegations were later filtered through the language of the courts. “Plaintiff observed that her performance evaluation scores suffered due to the stack ranking process due to her gender,” one declaration from Moussouris’ side reads. “Plaintiff was chastised at Microsoft for being too pushy, direct, ‘prickly,’ harsh, or aggressive.”

For its part, Microsoft maintains that Moussouris was well compensated for her work, saying that in two of her last three years at the company, she was paid more than the men in her group, including one year in which she was paid more than her male manager. Without more details, it’s hard to say if that was a result of an unusually big paycheck or an unusually low job title, and it doesn’t speak to the broader concerns about the work environment. Regardless, Moussouris began to feel she had no future at Microsoft.

In the years that followed, she worked hard to establish her cybersecurity career. She moved to a lead role at the pioneering bug bounty firm HackerOne, eventually starting her own shop called Luta Security and finding more success there than she ever had at Microsoft. She returns to these details now because she finds them typical of the compounding issues that keep women from rising at tech companies. As Moussouris sees it, women are steered away from engineering roles in dozens of different ways. The women that break through come into the industry underpaid and stay that way, thanks to institutional sexism and favoritism among managers. Those who rise run into harassment, retaliation, or outright assault.

Remembering her mother’s experience, she decided to do something. Having already raised the alarm internally at Microsoft, she filed a complaint with the Equal Opportunity Employment Commission, and when that process stalled, she went looking for a lawyer. Together, they decided on a plan — a class action seeking to represent all the female engineering employees at Microsoft, arguing they were being systematically underpaid.

To bring that case, she joined with Anne Shaver, a Bay Area lawyer who specializes in pay equity class actions. “Our theory of the case was simple — that Microsoft has a promotion practice that applies to all employees and results in pay disparities,” says Shaver. “The data at Microsoft spoke for itself.”

Then the 31st largest company in the world, Microsoft was still 60 percent white and 75 percent male. Those numbers got worse when you focused on “professional” employees, a legal category including the engineering team and most other technical workers. The company’s diversity report from 2015 showed just 22 percent of those workers identified as female.

Still, Microsoft was well-prepared for such a lawsuit, having prepared a range of personnel reports showing it was already closing the gender gap, no matter what the hiring numbers might suggest. Years earlier, the company’s diversity and inclusion team had produced a report showing women made more than 95 cents for every dollar earned by men. A more recent report on Microsoft’s website raises that number to $1; by its own measure, Microsoft has closed the gender pay gap.

But Shaver argues that, like many corporate pay equity studies, that analysis doesn’t address the way bias really works in these pay structures. Microsoft’s studies focus on pay within levels — essentially finding that women and men at the same place in Microsoft’s pay-band system are being paid roughly the same amount. But the study doesn’t address how they got placed in that pay level to begin with and whether women are being systematically placed at lower pay levels. Moussouris’ complaints were all about under-leveling, from the initial hire that she believes placed her at a pay disadvantage to the corporate culture that she says made it too easy for senior men to keep difficult women from getting raises.

This bait-and-switch is much larger than Microsoft. While advocates focus on the gap in wages-per-hour, skeptics can point to the “controlled pay gap,” which levels for seniority and finds almost no difference between the men and women at the same rank.

In the Microsoft case, litigating that difference meant years of work, with much of the court time spent pinning down exactly how much information Microsoft would release. Microsoft’s lawyers were able to confine the discovery to female engineering employees — but the discovery still unearthed 201 complaints over just the few years covered by the lawsuit.

Some were alarming in their detail: in one case, a Microsoft intern reported being raped by a young man in her program, filing a police report and receiving a medical exam before contacting Microsoft HR. She was told that a restraining order would result in her reassignment, so she didn’t press the issue. At the end of the term, both she and the alleged rapist were hired by Microsoft.

In the end, the judge in Moussouris’s case wasn’t moved by the volume of complaints. As the court saw it, there was no basis for concluding that the 201 reports were particularly high for a company of Microsoft’s size or otherwise indicative of a hostile environment for female employees.

“That was really shocking, because it’s so divorced from any sort of understanding of what it means for a woman to come forward and complain,” Shaver says. “They risked their careers to do that.”

While the case dragged on, a bigger shift was happening outside the courtroom. By the time discovery finished in Moussouris’ lawsuit, charges had been brought against Bill Cosby and Harvey Weinstein and a new awareness of high-profile predators was sweeping across every industry. In February 2017, Susan Fowler, a site reliability engineer at Uber, came forward with her experiences of sexual harassment and discrimination — provoking a reckoning for the company that ultimately resulted in the ousting of the CEO. The next year, a New York Times report revealed that Android founder Andy Rubin had left Google in response to a sexual harassment claim — but still received a generous $90 million exit package. A few days after the news broke, 20,000 Google employees walked out of work in protest, the largest mass labor action the industry has ever seen. The Google and Uber stories were taken as harassment problems, but they were just as much about equity — showing how bad behavior is rewarded while retaliation keeps marginalized workers underpaid.

In the end, what sank Moussouris’ case was a 2011 Supreme Court ruling in a case called Wal-Mart Stores, Inc. v. Dukes, which is cited in both the district court ruling and the appeals court’s decision to let it stand. A landmark victory for conservative jurists, the Dukes case was another gender pay gap lawsuit, hoping to represent more than 1.6 million women who had worked for Walmart. But the Supreme Court ultimately found it didn’t matter if there was evidence that women were being paid less across the company. Writing the majority opinion, Justice Antonin Scalia denied that systematic sexism could be assumed to be the motive force behind a pay gap.

“Left to their own devices most managers in any corporation,” Scalia wrote, “would select sex-neutral performance-based criteria for hiring and promotion that produce no actionable disparity at all. Others may choose to reward various attributes that produce disparate impact… still others may be guilty of intentional discrimination.” But crucially, “demonstrating the invalidity of one manager’s discretion will do nothing to demonstrate the invalidity of another’s.” As long as each manager was inflicting independent harms, there was no basis for class action status.

It’s a baffling ruling for lawyers like Shaver, who take the structural nature of sexism as a tangible and unavoidable fact. Pay imbalances are connected to harassment, just as harassment is connected to sexual assault. They’re bound together like links in a chain, with each offense dragging the others behind it. But for federal courts, the Dukes ruling broke that chain, recasting the thousand single incidents of discrimination as isolated points that could only be addressed one at a time. In practice, it meant they could barely be addressed in federal courts at all.

“This is what the conservative agenda has done to this area of jurisprudence,” Shaver says. “They are trying to decouple the two, and say what they call anecdotal evidence of harassment is irrelevant to pay equity.”

Faced with the Dukes ruling, pay equity lawsuits have mostly moved to the state level, where more specific state laws can give workers a way around the federal precedent. The Ellis lawsuit against Google (also brought by Shaver’s firm) alleges that Google violated the California Equal Pay Act, which mandates equal pay for employees who perform “substantially similar work.” The law doesn’t require further evidence of systematic discrimination, which was Scalia’s sticking point in the Dukes ruling. It also lets workers sidestep corporate studies showing equity within pay bands. As long as women in different pay bands or ladders are performing the same work, the company can be forced to pay up.

Still, not every state has an equal pay act, and lawsuits alone haven’t been enough to make a dent in the bigger problem. After 50 years of slow progress, recent studies have found the pay gap holding steady or even getting wider.

“I will not live to see pay equity at the current trajectory,” Moussouris says, “and I found that to be unacceptable.”

So she decided to do something. Moussouris’ first step is the Pay Equity Now Foundation, a nonprofit dedicated to raising awareness and pressuring companies to take action. The foundation’s central focus is the Pay Equity Now pledge, a three-part commitment to acknowledge pervasive bias, audit for it, and take action to correct it. Moussouris hoped that Microsoft would sign the pledge as a way of healing the rift left by the lawsuit. So far, the company has declined.

In February, Moussouris donated $1 million to establish a new center for pay equity policy at Penn State Law, the largest donation in the law school’s history. The money will go to fund active litigation, both bringing specific cases against specific companies and pressing appeals to chip away at the precedent set by Dukes. It’s an activist litigation project in the model of the American Civil Liberties Union — the slow, careful work of peeling back bad law. The hope is that when the next generation of plaintiffs tries to take on their employers, 10 or 20 years from now, the lab can make sure they face a friendlier legal system than the one that doomed the Microsoft case.

That work isn’t cheap, and none of it is likely to benefit Moussouris personally — but unlike the internal complaints of the lawsuits, it feels ambitious enough to change the odds that she and other women are facing. In a personal touch, Moussouris named the center after her mother, the Anuncia Donecia Songsong Manglona Lab for Gender and Economic Equity.

“I’m hoping that anyone who works for a major tech company in California gets the memo that all you need is the data that they’re underpaying, and you’ve got a class action case in California,” Moussouris says. “I’m hoping many, many lawsuits bring these companies to justice. Unfortunately, mine could not.”