Would YOU Want to Pay $100m to Settle a Discrimination Case?

Happy New Year! Did you make New Years’ resolutions? Many of us do. What about your business? Do you have any for your business for this year? I’m guessing that making a big payout to settle claims from employees wouldn’t be one of them, right?

Today I’m going to discuss with you a case against a company that is about to do exactly that. It’s not that I want to bad-mouth anyone. If you know me, you know that I like to look at cases in the news to see what the rest of you as business owners, executives — particularly as employers– can learn from them.

This case is historic. It has a bit of everything: sex discrimination, pay discrimination, harassment, retaliation. Oh my! So stay with me to learn first what makes it different from others, and second, what we can learn from it. Read on…

OK, so the picture is a bit of a giveaway. The case is Department of Fair Employment and Housing v Riot Games, Inc. Here, in a nutshell, is what allegedly went down:

Melanie McCracken and former employee Jessica Negron, filed a lawsuit against Riot Games in November 2018 on behalf of themselves and other female employees similarly situated (i.e. a class action lawsuit). In the complaint, they alleged that approximately 1,065 women employees and 1,300 women contract workers (current and former female employees) did not receive pay equal to their male counterparts and were passed over for promotions because of their gender. They also alleged a pervasive company culture of sexual harassment and misconduct including, without limitation, being subjected to the distribution of images of male genitalia. Any complaints made to HR were allegedly later used against them as proof the women were not a culture fit. (Apparently accepting sexual harassment was a criterion for being a “culture fit”.)

In December 2019, Riot Games agreed to settle the case for $10m. California’s Departments of Fair Employment and Housing (DFEH) and Labor Standards Enforcement (DLSE) stepped in, by moving to intervene in the case in early 2020 “to protect the interests of the State and women workers and ensure the fairness of the resolution of the claims”.  Initially, DFEH claimed that the womens’ claims were worth closer to $400m. Riot balked and then moved to enforce an arbitration clause to which all but McCracken had agreed when they signed their employment agreements.

The court granted the motion, but the class action lawsuit continued with the State agencies still as named parties on behalf of the workers. Wait. How can that happen? The State is not bound by an arbitration agreement between an employer and its employees. Also arbitration clauses do not preclude employees from filing a charge with the EEOC or a state counterpart.

On December 27, 2021, Riot agreed to pay $100m to settle all claims. Per CA’s Labor Commissioner, Lilla Garcia-Brower:

“My office determined that Riot’s proposed initial PAGA settlement with private counsel was
insufficient and did not adequately deter the company from violating women’s right to equal
pay for equal work…Under the Equal Pay Act, employers who pay women less than their male counterparts for substantially similar work are violating the law. Collaborating with DFEH produced a proposed
enforcement outcome that holds the employer accountable, compensates the workers, and
will result in the largest PAGA settlement DLSE has obtained to date.”

So, basically, DFEH and DLSE felt the behavior complained of was so bad that $10m just wasn’t enough to settle the claims or send a strong enough message.

OK, first, why is this case historical? For starters the $100m settlement amount. As DFEH Director Kevin Kish said, “If entered by the court, this decree will compensate employees and contractors affected by sex discrimination and harassment,
ensure lasting change in this workplace, and send the message that all industries in California, including the gaming industry, must provide equal pay and workplaces free from discrimination and harassment”

That’s not all, though. It’s the first case jointly prosecuted by DEFH and DLSE. The settlement includes at least $80 million dedicated to compensating more than 2,300 female Riot employees and contract workers. Also included as part of the settlement is $4 million in penalties under California’s Private Attorney General Act and the creation of a $6 million dollar per year cash reserve for three years ($18 million total) to make pay adjustments and fund diversity, equity, and inclusion programs.

The case also speaks to the mistreatment of both direct employees and staffing agency employees assigned to work at Riot Games.

Now let’s unpack the takeaways. Here are at least a few:

  1. Pay equity is very much on the radar screen of both federal and state agencies. If your employees in good faith raise questions about whether they are being fairly compensated, listen, investigate and address any pay disparities. Yes, it may cost you money, but a lawsuit will cost you far more. So will difficulty attracting and retaining good talent;
  2. Employment laws also protect temporary workers. If your company works with a staffing agency to temporarily (or not so temporarily) augment its workforce, the anti-discrimination laws protect those workers as well — and you are likely a joint employer of those workers. That means that if your practices have an adverse impact on any “temps” who are protected under anti-discrimination laws, your company (and perhaps the staffing agency) will be liable if they sue or file a charge.
  3. Don’t use an employee’s complaints against them. That’s another way of saying Don’t retaliate! An employee who in good faith complains of an employment law violation cannot legally be fired or targeted by your company as a “bad fit”.
  4. Harassment of any type is never OK– and it’s never OK to expect an employee to accept it. It should never be a condition of employment– whether explicit or implied.
  5. Even binding arbitration agreements may not protect a company from large payouts, as this case demonstrates.

I can’t feel sorry for Riot. The situation did not have to get to this point. Riot could have done a proper investigation and acted appropriately to resolve complaints upon receipt. Riot could have consulted with competent employment counsel — and listened to advice. It clearly chose differently and is now about to pay dearly for it.

This doesn’t have to be your company.

culture? Visit my website, http://www.theemplawyerologist.com to contact me for a complimentary 20-minute consultation. 

Watch the latest video clip in my series, “Ask the Employer’s Lawyer: My Employee Has Exhausted All Her FMLA Leave Time. What do I do?

Watch my television interview on Stop My Crisis with Vivian Gaspar.

Contents of this post are for educational/informational purposes only, are not legal advice, and do not create an attorney-client relationship. Consult with competent employment counsel in the state(s) in which you employ people with your specific questions.

Before choosing an attorney, you should give this matter careful thought. The selection of an attorney is an important decision. If you find this communication to be inaccurate or misleading, you may report it to the Committee on Attorney Advertising Hughes Justice Complex, CN 037, Trenton, NJ







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