Activision Blizzard Has Ignored the Call of Legal Duty

Earlier this week, California’s Department of Fair Employment and Housing (DFEH) filed a blistering 30-page complaint accusing Activision Blizzard of blatant and pervasive employment discrimination. This week, I’ll explain the substance of the complaint, consider the significance of Activision’s response, and provide some thoughts on what I think is likely to happen next.

First, here is the short version:

• DFEH’s complaint alleged that Activision violated essentially all of California’s laws against sexual discrimination and harassment.
• Activision’s public response does not meaningfully deny the substance of the complaint’s allegations.
• I fully expect this case will settle. Activision wants this out of the news permanently and quickly.

What’s in the Complaint Against Activision Blizzard?

DFEH’s complaint alleges that Activision Blizzard violated essentially all of California’s laws against sexual discrimination and harassment. Among other things, the complaint alleges the following:

• “Defendants’ gender pay gap is significant. Defendants paid female employees significantly less in base pay and total compensation than their male counterparts. This pattern or practice and violations were continuing.”
• “Female employees almost universally confirmed that working for Defendants was akin to working in a frat house, which invariably involved males drinking and subjecting female employees to sexual harassment with no repercussion.”
• “Female employees are subjected to constant sexual harassment, including having to continually fend off unwanted sexual comments and advances by their male co-workers and supervisors and being groped…”
• “(F)emale employees experienced retaliation by Defendants that included involuntary transfers, selection for layoffs, and denial of projects and other opportunities.”

The complaint also provides several specific examples of misconduct. For example, the complaint alleges that a female employee was denied a promotion based on the grounds that “they could not risk promoting her as she might get pregnant and like being a mom too much,” and that several other employees received negative evaluations while they were on maternity leave.

Finally, the complaint explains that the suit resulted from an investigation that began over two years ago, and it asserts that “DFEH attempted to resolve this matter without litigation” but that the parties were not able to agree on an appropriate settlement.

While the settlement discussions took place behind closed doors, the fact that no settlement was reached suggests that Activision and DFEH had substantial disagreements as to the extent of discrimination and/or as to the nature of corrective action (including monetary compensation).

What Happened After the Complaint Was Filed?

In the days following the complaint, Activision offered several written responses. The public response amounts to a general denial of the allegations included in the complaint. Activision stated that “the picture DFEH paints is not the Blizzard workplace of today,” asserted that the company has “made significant changes to address company culture and reflect more diversity within our leadership teams,” and claimed that the complaint “includes distorted, and in many cases false, descriptions of Blizzard’s past.”

It’s easy to see why Activision’s public response does not engage with the complaint’s specific allegations. (We’ll have to wait for its court papers for that.) Nevertheless, the response still suggests that Activision is in serious trouble. For one thing, Activision doesn’t really dispute the complaint’s allegations regarding its previous misconduct. Instead, Activision focuses mostly on its current culture through statements like “We value diversity,” or “we are committed to continuing” efforts to foster a supportive, diverse, and inclusive workplace.

The second problem with Activision’s response relates to the timeline. Activision claims that it “made significant changes” “over the past several years and continuing since the initial investigation started.” But even if that’s true, it doesn’t actually refute any of the allegations in the complaint. The question is whether the “significant changes” actually made a difference to the company culture. The complaint suggests that the purported “significant changes” did not make a difference, and Activision’s statement does not say otherwise. The fact that a change was significant does not mean the change was effective.

Internal email statement from Rob Kostich, president of Activision

In addition to the public response, several Activision executives and team leads sent internal emails addressing the complaint, including a particularly fiery email from the company’s Chief Compliance Officer that characterized the suit as “truly meritless and irresponsible.” The internal emails aren’t especially notable, other than simply confirming that Activision intends to fight the lawsuit. The letters acknowledge that “the behavior detailed in the allegations is completely unacceptable” but stop well short of acknowledging any wrongdoing.

Finally, in the days since the complaint was filed, several former Activision employees have come forward with even more anecdotes and stories of harassment and discrimination. If nothing else, these accounts confirm — as one might have suspected — that the lawsuit is not “truly meritless.”

Internal email statement from Activision Blizzard Chief Compliance Officer Fran Townsend

What Is Likely to Happen from Here in the Activision Blizzard Lawsuit

The suit against Activision Blizzard has much in common with the suit that was previously filed against Riot Games. That case ended with a pretty sizable settlement. I fully expect that the same will happen here.

To put things in perspective, the complaint’s core allegations are extreme and are couched in terms much broader than the legal minimum for liability. For example, the complaint alleges that “Defendants’ gender pay gap is significant.” It may be that Activision can show — as it claims in its public statement — that the allegation is distorted or overblown. But it’s not enough for Activision to simply rebut the allegation. That is, it is not enough for Activision to show that the pay gap is not significant or even to show that Activision has succeeded in reducing the pay gap. No — to avoid liability, Activision must show that there is no gender pay gap.

The same type of analysis applies to the complaint’s other allegations. For instance, the complaint alleges that “female employees are subjected to constant sexual harassment.” As with the pay gap — it’s not enough for Activision to show that female employees are only subjected to frequent sexual harassment, permissive sexual harassment, or even sporadic sexual harassment. Instead, to avoid liability, it would have to show that female employees are not subjected to sexual harassment. The takeaway here is that DFEH is likely to prevail even if its evidence falls well short of what is alleged in its complaint. More broadly, this suggests it will be hard for Activision to avoid liability, a fact that makes settlement much more likely.

Notwithstanding any of the above, there are two reasons why things may not be insurmountable for Activision Blizzard. First, the complaint is sloppy and does not reflect an eye for detail. For instance, the complaint alleges that one of Activision’s executives had a suite that was “nicknamed the ‘Crosby Suite’ after alleged rapist Bill Crosby.” But there is no alleged rapist named Bill Crosby — the complaint was plainly referring to Bill Cosby. (For what it’s worth, others have made the same mistake.) Elsewhere, the complaint alleges that “in retaliation for complaints they made regarding harassment and discrimination, female employees experienced retaliation by Defendants.”

These blunders signal that the complaint was not drafted with care, and it provides good reason to think that the drafters may not have fully vetted all of the allegations contained in the complaint and may not have taken steps to ensure the facts as alleged line up with the facts as determined in the investigation. This lends credence to Activision’s assertion that the complaint got several facts wrong.

Second, a common thread throughout several of Activision Blizzard’s statements, both public and private, is that DFEH did not share the results of its investigation with the company prior to filing suit. If that’s true, then Activision will now have the information it needs to negotiate a reasonable settlement. Put differently, the fact that DFEH did not share the full results of its investigation would help explain why the parties were unable to reach an agreement before the suit was filed.

All told, I’m fairly confident this case will settle. Given the PR hit Activision Blizzard has already taken, we can be pretty confident that the last thing it wants is a series of public proceedings in which dozens of women testify about the discrimination, abuse, and retaliation they experienced and how management (including executives) failed to intervene. While it would have been much better to avoid wrongdoing in the first place, DFEH’s complaint — and the likely settlement — has a silver lining, as it will serve as a warning to other offenders that discrimination and harassment have consequences. In this vein, the suit and presumed settlement will hopefully cause other companies to answer the call of legal duty by taking meaningful steps to ensure equal pay and healthy working environments.