$40K Payout Exposes Compliance Risk: Maternity Leave Mistake

A $40,000 payout over a leave policy breakdown shows how quickly compliance risk can turn into a financial problem that finance teams are left to manage.

That’s what happened when a Maryland plant nursery told an employee attempting to return from maternity leave that no work was available. The result: a federal pregnancy discrimination lawsuit and a $40,000 settlement with the EEOC.

For finance leaders, the case is a clear signal that breakdowns in leave policy don’t just trigger legal action – they create a compliance risk that turns into financial exposure, audit vulnerabilities and reputational fallout, all of which land squarely in Finance’s domain.

A Costly Breakdown in Leave Policy

The employee began working at the company in 2017 and took maternity leave in fall 2023. When she tried to return in December, she was told no work was available – despite the company hiring others during her absence.

The EEOC concluded that the alleged conduct violated the Pregnant Workers Fairness Act (PWFA) and Title VII of the Civil Rights Act, as amended by the Pregnancy Discrimination Act. After failed conciliation attempts, the agency filed suit.

The company agreed to pay $40,000 to resolve the dispute. Under the consent decree, the company was required to provide training on pregnancy discrimination, update policies and post a remedial notice.

Why This Case Should Be Front and Center for Finance Leaders

Even if compliance teams oversee policy execution, Finance is on the hook when compliance risk turns into operational cost. This case illustrates how poorly documented or inconsistently applied leave processes can create:

• Unbudgeted legal fees and settlements
• Resource gaps from mismanaged return-to-work transitions
• Increased scrutiny during audits or DOL reviews, and
• Reputational damage affecting recruitment or investor confidence.

And in industries with seasonal staffing, high turnover or frontline roles, leave-related claims aren’t exceptions – they’re a predictable compliance risk with recurring financial impact.

Key Steps to Mitigate Compliance Risk

Finance leaders are increasingly being called on to co-own compliance risk strategy alongside HR and legal. Here are three practical ways to strengthen your organization’s defenses while managing cost exposure:

1. Add Compliance to Risk Forecasting Models

EEOC litigation data from FY 2024 shows that 59% of lawsuits involved Title VII violations, and nearly 5% cited the PWFA, underscoring the trend. This case isn’t a one-off; it’s part of a pattern.

What to do:

• Add compliance risk as a category in your operational risk register
• Allocate legal reserves based on agency enforcement activity (e.g., EEOC, DOL), and
• Track claims related to maternity leave, return-to-work issues, or other leave-related compliance areas by department to assess where compliance risk is most likely to occur/

2. Don’t Wait for Compliance to Flag Gaps: Ask for Audit-Ready Processes

In this case, the employer’s actions raised concerns due to the timing of hiring decisions during the employee’s leave and the lack of clear justification for not reinstating her.

While the EEOC did not specifically cite documentation failures, patterns like these often point to unstructured or inconsistent processes – a common compliance risk.

What to do:

• Request quarterly audits of leave administration, including return-to-work communications and decision logs
• Build financial oversight into high-risk processes such as job reinstatement, accommodation reviews or leave extensions, and
• Standardize documentation protocols – including time-stamping, manager approvals and clear justification for personnel decisions – to ensure audit readiness.

3. Invest in Targeted Measurable Training

The consent decree required pregnancy rights training for managers – a detail often overlooked until it’s too late. Skipping or checking the box on training introduces avoidable compliance risk.

What to do:

• Budget for brief, role-specific training tied to real scenarios
• Link training completion to manager performance goals and include compliance risk mitigation as a key metric in performance evaluations to ensure accountability, and
• Document training delivery, employee acknowledgments and manager sign-offs.

Compliance Failures Are a Known Risk – and a Controllable Expense

Defending against employment claims is a growing financial risk. According to attorney Farhad Novian of Novian & Novian LLP, average pre-trial settlements cost about $75,000. If a case proceeds, defense costs can exceed $125,000 – and that’s before any judgment.

These numbers make a compelling case for investing in compliance risk mitigation upfront. The cost of training, auditing or policy updates is a fraction of even a relatively small EEOC settlement.

Finance can play a direct role in limiting legal exposure by integrating compliance risk into operational budgets and holding departments accountable through documentation and oversight.

By identifying and addressing compliance risk, finance leaders can ensure long-term financial stability by minimizing costly legal issues and improving organizational accountability.