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Activision Sells Culture Shakeup to Skeptics in Harassment Deal

Oct. 1, 2021, 8:30 AM

Activision Blizzard Inc.‘s plans to create an $18 million fund for victims of sexual harassment and discrimination allegations and implement workplace reforms will bring a new set of challenges to the embattled video-game giant.

The settlement with the Equal Employment Opportunity Commission marked a landmark moment in the effort to combat the gaming world’s alleged “bro culture” of gender bias, said legal experts and industry watchers.

Activision, though, must now implement a number of reforms to their work culture, including increased access to mental health services and other measures experts said will be unique in the tech industry, even as the company simultaneously works to resolve or fight off other lawsuits from regulators and investors.

The deal also faces a hard sell with many of the industry’s toughest critics, including workers, over whether it goes far enough.

“We’re talking about a culture that has festered over decades now, so it’s going to take a lot of time and effort for things to change,” said Vijay Mani, a partner at the Thatcher Law Firm in Maryland.

Money for Victims

Much of the attention on Activision’s proposed settlement with the EEOC, which must be approved by the U.S. District Court for the Central District of California, focused on the $18 million fund the company is creating for alleged victims.

“Anytime you have a settlement that’s public, and it’s a significant monetary settlement, it sends a message far and wide, that discrimination does not pay,” said Sunu Chandy, legal director at the National Women’s Law Center.

Activision has 30 days to hire a claims administrator, approved by the EEOC, to oversee the process of making payments. Current and former employees dating back to Sept. 1, 2016 who believe they are entitled to an award under the settlement can submit a claim for the agency to evaluate.

Court filings didn’t indicate how many workers could be covered by the settlement, and the agency declined to comment on pending matters.

Excess funds not distributed to class members will be donated to charitable groups working on gender equity issues in the tech industry, and to a Diversity and Inclusion Fund for Activision’s own equity efforts beyond the scope of the EEOC agreement.

But the size of the fund is already drawing criticism.

“Yesterday’s insufficient EEOC settlement made it clear that the thousands of Activision Blizzard workers who have suffered from years of toxic workplace misconduct on behalf of Activision Blizzard will not receive true justice,” Sara Steffens, secretary-treasurer of the Communications Workers of America said in a statement Sept. 28, a day after the announcement.

“An $18 million settlement is mere pennies considering the resources available to this cash-rich corporation.”

Distributing Funds

Lawyers and industry watchers said it’s still unclear what the payout could be for individual employees who faced harassment, discrimination, or retaliation at Activision.

“At this point, we don’t know how much money an individual woman could receive. When you’re talking about paying claimants out over a longer period of time, that number really dwindles,” said Mani.

Mani said in a jury trial he would have expected a much larger award in a similar case.

“With this particular settlement, with such a large corporation, it’s not what a jury would typically award,” he said. “Given the facts of the case, a jury would likely have given a much bigger amount.”

Activision Blizzard directed a request for comment to the company’s Sept. 27 press release.

“There is no place anywhere at our company for discrimination, harassment, or unequal treatment of any kind, and I am grateful to the employees who bravely shared their experiences,” CEO Bobby Kotick said in the statement. “I am sorry that anyone had to experience inappropriate conduct, and I remain unwavering in my commitment to make Activision Blizzard one of the world’s most inclusive, respected, and respectful workplaces.”

Workplace Changes

The company is also agreeing to change employee policies.

There will be ongoing oversight by a third-party consultant of the company’s “training programs, investigation policies, disciplinary framework and compliance,” according to Activision’s statement on the settlement. The consultant will report their findings to both Activision’s board and the EEOC.

Chandy pointed to two additional provisions in particular as “quite innovative.”

Former employees who the EEOC finds were fired for retaliatory purposes will have their personnel files updated to reflect voluntary dismissals rather than terminations, and the settlement will give employees more access to counseling.

“This is the first EEOC consent decree I’ve seen that has included the mental health provisions, which are so crucial, and so lacking in much of the work that’s done,” Chandy said.

Sanford Heisler Sharp LLP attorney Kate Mueting said including mental health resources sends a message to Activision employees that the company “recognizes the effects of ongoing discrimination and harassment on mental health.”

Mueting also pointed to a provision that requires managers and human resources personnel to be evaluated in part on their compliance with anti-bias policies.

“The types of changes that are included in the agreement are changes that, if done correctly, are really important and could be really beneficial to female workers in particular,” Mueting said.

The company also announced an initiative to develop software tools and training programs to improve workplace practices for employers across the technology industry.

Industry Example

David Lopez, formerly EEOC’s general counsel during the Obama administration, said it was noteworthy that the agency was targeting a video game company.

“I think tech has always been a meddlesome challenge for the enforcement agencies because some of these companies are really big, and really well-heeled, and they often operate behind several veils of secrecy,” he said. “It shows that the enforcement agencies are watching and that there’s going to be some accountability.”

Lawyers said the settlement could become a template for other companies dealing with similar issues.

Chandy said the settlement includes requirements that go beyond just new policies and required trainings, and other entities should look at the terms and implement them instead of engaging in years of litigation battles.

Activision still faces a host of other legal headaches, including a separate lawsuit over alleged harassment from California’s Department of Fair Employment and Housing, and an Securities and Exchange Commission investigation into the company’s disclosures over workplace issues.

The EEOC settlement bodes well for the state claims, which are likely to be settled as well, said Mani. California has strong anti-harassment laws, and it’s unlikely Activision would try to litigate and defend against them at the state level.

But he cautioned that change at Activision — and in the wider tech industry — won’t happen overnight.

“This is just one step,” Mani said.

—With assistance from Paige Smith

To contact the reporter on this story: Maeve Allsup in San Francisco at mallsup@bloomberglaw.com

To contact the editors responsible for this story: Meghashyam Mali at mmali@bloombergindustry.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com

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