The California Agency That Has Gone So Rogue Even Newsom Can’t Control It

C alifornia’s Civil Rights Department was once committed to ensuring safe, harassment-free workplaces. Now it’s the department itself that’s doing the harassing.

The state legislature created CRD in the 1950s. Back then, it was called the Division of Fair Employment and Practices, and its mission was to mediate disagreements between workers and employers. These days, the agency skips mediation and moves directly to warfare — hiring private law firms to sue California companies and funding its operations from the resulting million-dollar settlements. That strategy often deprives plaintiffs of the money you might suppose they’re entitled to. Just as bad, CRD has tried to block settlements mediated by the federal government, delaying cash payments to California workers in workplace cases.

All of this is clear in the department’s high-profile case against Santa Monica–based Activision, the company behind such commercially successful games as World of Warcraft, Call of Duty, and Overwatch.

CRD sued the video-game maker in July 2021 for what the agency called a “pervasive ‘frat boy’ workplace culture” that CRD says drove female employees to quit. But Activision was already close to settling those claims with the federal Equal Employment Opportunity Commission (EEOC) and ultimately agreed to establish an $18 million fund for alleged victims to implement reforms under federal oversight. The feds told CRD to back off, but CRD persisted.

News of CRD’s late entry into the Activision case caught the attention of Governor Gavin Newsom, and that’s when things got weird. Claiming that Newsom was interfering with her lawsuit, Janette Wipper, CRD’s chief counsel, loudly and publicly resigned from the case against Activision. Newsom fired her. Then Wipper’s deputy resigned, repeating Wipper’s claim of gubernatorial interference.

If Wipper’s termination was intended to spur a broader course correction at CRD, it failed. A new report by California Policy Center notes that Wipper’s boss, longtime agency director Kevin Kish, still runs CRD. And the agency continues to appeal the Activision ruling fully a year after a federal judge approved the federal consent decree.

CRD’s intervention in this and other cases would seem a clear violation of “the purposes of Title VII [of the 1964 Civil Rights Act] by permitting state agencies to derail settlements for their own financial and political gain,” the report says.

Clearly, this is a rogue agency operating beyond the control of the governor.

The California Policy Center report suggests that the problem began in 2012, when then–governor Jerry Brown signed Senate Bill 1038. That law allows CRD to skip mediation and take discrimination complaints directly to court. More critically, S.B. 1038 also created a special fund connected directly to the department — outside of the state’s general fund — into which court awards or settlements are deposited to support the department’s budget. Often referred to as a “bounty hunter” provision, this type of budgeting mechanism creates an incentive for the agency to pursue cases and strategies with higher rates of financial return rather than those that might best serve the public interest, in the hope of sharing some of the reward.

The bounty-hunter provision means that CRD does not pay out all settlement money to victims of harassment or discrimination. Instead, it relies on massive settlements to help cover the agency’s operating costs, including paying private law firms to prosecute its lawsuits. This is in stark contrast to the agency’s original mission of pursuing smaller claims that plaintiffs’ attorneys would normally not. In 2020, for example, the CRD had settled more than 700 cases for a total value of less than $11.2 million.

Being allowed to eat what it can catch incentivizes CRD to pursue high-dollar cases — even when those cases, as is Activision’s, have already been settled. That pathology is certainly obvious to federal EEOC officials. Early in the investigation, the feds and state regulators confirmed their long-standing work-share agreement to avoid just the kind of dueling claims that are now clogging the courts: While the EEOC reviewed allegations of harassment, CRD was supposed to review pay equity and related issues. CRD specifically agreed that it would not investigate sexual-harassment claims.

But CRD broke its agreement with the EEOC, violated its own procedures, and filed a surprise eleventh-hour lawsuit against Activision when it learned that the company was on the verge of settling with the EEOC. CRD did not complete the independent investigation it had started in order to determine the accuracy of the allegations in its lawsuit. Nor did that lawsuit focus on pay equity but instead leveled sexual-harassment allegations outside the stated scope of its investigation. EEOC officials have accused CRD attorneys of ethical misconduct and of violating California’s own legal-ethics rules.

Activision isn’t alone in fighting the state juggernaut. Consider the case of Tesla. In February, CRD sued the California automaker alleging systematic racial discrimination and harassment. Focusing on Tesla’s Fremont plant’s workforce, the lawsuit quotes dozens of media stories and administrative complaints. But CRD never independently investigated the claims. Without investigating, the state’s suit refers to Tesla’s factory as “racially segregated” and as a “slave ship.” CRD declined several requests to provide Tesla with the specific allegations or the factual bases for them.

This month, state lawmakers are taking up budget matters at the CRD. In addition to scrutinizing the department’s director, the California Policy Center report recommends several other reforms.

Lawmakers should end the bounty-hunter incentive — the link between the department’s budget and the money it amasses in penalties, judgments, and settlements. The legislature should supply the department with administrative-law judges to help it mediate cases rather than lean first on litigation. Employers accused of wrongdoing must be afforded time to review and respond to specific allegations before good-faith settlement talks. And CRD must report — in annual public documents — how much it has taken from employer settlements and how it uses those funds.

Make these changes and California lawmakers will have returned the Civil Rights Department to its proper role: protecting the civil rights of California workers no matter how big the potential payday is for CRD.

Steve McCarthy provided research assistance for this report.