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Gaming’s ‘Bro Culture’ Faces Crackdown From California Regulator

Aug. 24, 2021, 8:46 AM

California is taking the lead in cracking down on “bro culture” in video games, with enforcement actions targeting two of the industry’s biggest players, Activision Blizzard, and Riot Games, a unit of Tencent Holdings Ltd.

The California Department of Fair Employment and Housing, empowered by strong state laws on workplace bias, conducted investigations into the two companies, and sued Activision last month over allegations of sexual harassment and discrimination.

The agency’s actions are sending a strong message to the gaming world and to workers eager to publicize troublesome workplace practices, lawyers and industry watchers said. It also provides a template for civil rights and employment regulators in other states to crack down.

It’s unusual for a state agency like the DFEH to pursue such cases itself in court, said Noreen Farrell, executive director of Equal Rights Advocates, a civil rights organization focused on gender in the workplace.

“It is a powerful signal to the gaming industry of the standards it will apply to other cases across California, and it may embolden state agencies elsewhere to do the same,” Farrell said.

Powerful Regulator

The agency’s intervention can be a game changer, lawyers said. DFEH can also bring state resources and the public spotlight to bear, raising pressure on companies to address bias and harassment, said Therese Lawless, a San Francisco civil rights attorney.

“Agencies tend to have more clout than an individual attorney and can force more public policy changes,” Lawless said.

DFEH is tasked with enforcing California laws against discrimination, violence, and human trafficking, and unlike similar agencies in other states, has teeth, according to advocates.

“California has some of the strongest state laws in the country addressing harassment and discrimination, so it is certainly a good venue to set standards for the gaming industry,” explained Farrell. “These include clear definitions about what constitutes sexual harassment and strong prohibitions against retaliation,” she added. “California also benefits from the California Fair Pay Act of 2015.”

Tough Tactics

Lawyers said the California agency has been using those advantages to show it is serious about cracking down on abuses in the gaming industry, and that its approach was rattling companies.

DFEH opened an investigation into allegations of harassment, discrimination, and assault at Riot Games in 2018. In January 2020, the agency and the Division of Labor Standards Enforcement stepped in to block the company from finalizing a $10 million settlement with female employees alleging pay disparities and sexual harassment. The agencies said the settlement grossly undercompensated employees for claims that could have been worth as much as $400 million.

“It is highly unusual to see a state agency—much less two agencies—intervene to object to a settlement of a class action,” said Scott J. Wenner, a partner at Schnader Harrison Segal & Lewis LLP.

Last week, DFEH also went to court to compel Riot Games to notify employees they could cooperate with the agency’s probe, accusing the company of using “secret” settlements to prevent workers from speaking to regulators.

Riot Games blasted the move, calling it an attempt to “smear” the company by a “rogue, press hungry agency.” The company said it has repeatedly told employees they may speak to DFEH without fear of retaliation, that it already sent the requested notices to 66 employees, and had already promised the court to produce the remaining contact information by Aug. 20—only a day later than DFEH sought.

Ripple Effects

The agency also made waves in July when it sued Activision, alleging a “frat boy” work culture. The suit appeared to catch Activision off guard, with an initial response calling the complaint “distorted,” while adding that there was no place for “sexual misconduct or harassment of any kind.”

The company’s response sparked backlash from employees, with workers signing petitions and staging walkouts to protest sexual harassment in the industry. Activision Blizzard CEO Bobby Kotick apologized and the company hired Wilmer Cutler Pickering Hale and Dorr to investigate its culture.

Wenner said the agency actions highlighted the rapidly changing climate for companies dealing with allegations of harassment or gender bias, pointing to broad employee activism, the involvement of shareholders pushing for change, and scrutiny on arbitration or non-disclosure agreements that critics say silence workers.

“These tactical devices and their aggressive use to support employee claims in both the Riot Games and Activation Blizzard disputes are important for all employers to recognize and consider in assessing the risk of systemic sexual discrimination and harassment claims,” Wenner said.

Activision Blizzard did not comment for this story. Riot Games pointed to their filings against DFEH.

Contentious Strategy

The agency’s approach, which is seen as aggressive by some and carried out in the public eye, has its detractors. John C. Fox, a partner at Fox, Wang & Morgan PC, questioned why the agency was bringing its own lawsuits.

“California has very able, very numerous civil rights plaintiff’s lawyers who have led the nation in civil rights enforcement,” Fox said. “There’s no reason for the state to spend resources on these types of lawsuits.”

Fox said the agency’s approach seems designed to “embarrass the companies publicly,” claiming the shift to high-profile public litigation is a strategy begun under DFEH Chief Counsel Janette Wipper, who joined in 2018.

“Wipper’s style is to try and publicly embarrass companies so that they will kneel to the public derision,” Fox said. “Most state agencies leave class action cases to plaintiffs’ lawyers, but what’s different in California is Janette.”

Wipper previously was head of the Pacific region for the U.S. Department of Labor’s Office of Federal Contract Compliance Programs, which oversaw a lawsuit against Oracle over pay discrimination.

“Janette is repeating a process that she applied to major Silicon Valley companies when she was at OFCCP,” Fox said. “Ultimately, it’s taxpayers who have to pay for all of this litigation, and cases like this are expensive and can go on for many years.”

DFEH didn’t comment on the record for this story. When the agency filed its suit in July against Activision, it said it only did so after a two-year investigation and attempts to resolve the allegations without litigation. The agency said it invited Activision to participate in mediation sessions on three dates.

More Crackdowns

DFEH’s public crackdown could also spur agencies beyond California to take a closer look at tech and gaming work practices in their own states, said Cheryl Priest Ainsworth, a senior attorney at Theodora Oringher PC.

Other states with large tech workforces, such as Colorado and Washington, have similar agencies to DFEH, Ainsworth said, but not all state agencies have the same powers.

Some lack powers to bring discrimination or harassment claims to court, Ainsworth said. For state agencies that can only use administrative proceedings, those actions don’t attract the same level of public attention or scrutiny, she added. “For a company, the stakes can be a lot higher in court than in that administrative setting.”

But for those fighting workplace harassment, there are hopes California is opening the door to similar crackdowns elsewhere.

“Other state agencies can and should follow the example of the DFEH and press enforcement so that women and others can work in safety,” said Farrell.

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; Andrew Childers at achilders@bloomberglaw.com

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