Workplace discrimination occurs when an employee is treated unfavorably because of their sex, gender identity, race or skin color, age, national origin, religion, or disability. Federal laws against discrimination also protect workers from retaliation when they decide to assert their rights to be free of this kind of discrimination. Despite that, it remains a problem in the workplace and carries significant consequences.
Some of the most recent figures show that the U.S. Equal Employment Opportunity Commission (EEOC) received 67,448 charges of discrimination in the workplace during the fiscal year 2020, with the agency securing over $439 million for victims in state and local government workplaces as well as the private sector. Large corporations, in particular, have had to pay out hundreds of millions of dollars due to discrimination cases. While the cost to smaller businesses is unlikely to come with such a high price tag, discrimination can still have a big negative impact on the bottom line, something that goes well beyond the cash liability.
Higher Turnover Rates
Employees who observe discrimination regularly are more likely to leave the company, increasing turnover. While some turnover is necessary and even beneficial, like firing a poor performer, if a business’s voluntary turnover level is high, it’s likely to lose competent, skilled workers. Having to recruit and train replacements is costly and also affects productivity. Even those who stick around can be affected by the environment, making them less loyal and committed.
A company with discriminatory practices is likely to end up with a poor reputation in the community, which affects the ability to win over potential new clients and hire the most qualified employees. When the staff is unhappy, they tend to tell their friends, family, and neighbors, who will probably avoid patronizing the business or even considering it for a new job. Savvy job seekers usually research companies before applying, and if they discover discrimination lawsuits have been filed, they tend to go elsewhere. It can have a dramatic effect on recruiting abilities, leading to the loss of top industry candidates.
Discriminatory practices don’t just affect the job satisfaction of those who are being discriminated against, it can affect all employees. When staff members see bonuses and promotions being given on the basis of race, age, gender, or any other discriminatory factor, their motivation to do the best possible job to advance within the company is negatively affected. Unmotivated employees usually equal a loss in both productivity and motivation.
The Bottom Line
As mentioned, workplace discrimination comes with a high financial toll with fines in the hundreds of millions of dollars as it’s illegal, covered by a myriad of federal legislation that includes the Age Discrimination in Employment Act, the Americans with Disabilities Act, and Title VII of the Civil Rights Act of 1964. But it’s not just those fines a business should be concerned with. The time it takes to respond to a discrimination complaint can be significant, and time is money. If you have a small business and there isn’t anyone on staff who has experience dealing with these issues, you’ll probably need to hire a lawyer to investigate and draft a response. That affects your bottom line even if the charge does end up being dismissed.