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Alphabet's Google Sued for Pay Discrimination Against Women

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Alphabet Inc.'s (GOOGL - Free Report) Google continues to grapple with legal hassles as it faces fresh allegations for practicing pay discrimination against its female workforce. 

The suit was filed on Thursday in San Francisco Superior Court on behalf of former women employees Kelly Ellis, Holly Pease, and Kelli Wisuri who accused Google of placing women employees in lower career paths. They also say that the company is paying them lower salaries and bonuses than their male peers.

The suit claims that Google violated the California Equal Pay Act and urged the court to compel it to pay for damages and correct its hiring practices.

We observe that Alphabet has gained 17.7% year to date, outperforming the 14.6% rally of the industry it belongs to.

James Finberg, a San Francisco attorney and the lawyer for the plaintiffs stated that "this lawsuit is an effort to pull down the barriers and shatter the stereotypes." He added, "We can bring about positive change not only at Google but at other companies in the Silicon Valley".

Finberg expects the lawsuit to attain class action status and represent all women who worked for Google in California over the last four years.

Google’s Reaction

Senior manager of corporate communications at Google, Gina Scigliano wrote in an email that the company does not agree with the lawsuit’s central allegations.

Alphabet Inc. Revenue (TTM)

“Job levels and promotions are determined through rigorous hiring and promotion committees, and must pass multiple levels of review, including checks to make sure there is no gender bias in these decisions,” she wrote. She added “And we have extensive systems in place to ensure that we pay fairly”.

Does the Gap Really Exist?

Earlier this month, The New York Times published salary data shared by around 1,200 Googlers (roughly 2% of the company’s global workforce) in the United States.

The data containing salary and bonus information for 2017 disclosed that women make less than men in 5 out of 6 job levels. At level 3, the entry level for technical positions, women get 4% less in salary and bonus than men. The gap widens to 6% at level 5. Google said that the spreadsheet information ignored a number of important factors such as employee location, position and performance.

The lawsuit itself cites data from a 2015 review of Google’s employment practices by the contract compliance unit of the U.S. Department of Labor (DOL). A statistical regression analysis performed by the agency on pay of about 21,000 employees of the tech giant’s Mountain View office revealed “systemic compensation disparities against women.”

Notably, earlier this year, the company was sued by DOL for not revealing employee pay information that the department seeks regularly for compliance evaluation.

According to David Gottlieb, a civil rights attorney at Wigdor LLP in New York, despite U.S. companies and the society at large taking steps in favor of equality, gender-based pay disparity against women continues.

Is Google in Trouble?

The charges are disgraceful for a brand that apparently has always been vocal about its stand against any gender-based disparity. According to Fortune, on Equal Pay Day (Apr 4, 2017), Google used the Twitter (TWTR - Free Report) platform to announce that it has “closed the gender pay gap globally.”

However, amid repeated gender disparity charges, this claim can now be taken with a pinch of salt. If Google’s found guilty, it will not only lead to a hefty penalty but also affect its brand image.

Alphabet is already mired in legal troubles practically across all continents, which have earned it a bad name on privacy concerns, anti-competitive concerns, patent infringements, tax theft and what have you.

Recently, the European Commission (“EC”) slapped a record $2.9 billion fine on the company for favoring Google Shopping/Google Product Search/Froogle over comparison shopping services of competitors. Google has appealed against this fine.

The company has two other cases pending. One of these is related to Google using the Android platform to force hardware makers bundle Google services and prevent the preloading of rival services on the devices. The other involves restricting access to ads provided by its competitors, which might hit its core AdSense business. Therefore, investors remain wary.

Zacks Rank and Stocks to Consider

Alphabet carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Activision Blizzard, Inc. (ATVI - Free Report) and Applied Materials, Inc. (AMAT - Free Report) each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings per share growth rate for Activision and Applied Materials is projected to be 13.6% and 17.1%, respectively.

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