A turf war between federal and California workplace civil rights agencies, who ran dueling discrimination probes into Activision Blizzard and Tesla, is giving companies a playbook for creating regulatory chaos.
A turf war between federal and California workplace civil rights agencies, who ran dueling discrimination probes into Activision Blizzard Inc. and Tesla Inc., is giving companies a playbook for creating regulatory chaos and fighting back against agency actions.
Legal observers say Tesla, which disclosed it was the subject of parallel investigations over racial discrimination by the U.S. Equal Employment Opportunity Commission and the California Department of Fair Employment and Housing, is already taking a page from the tactics of Activision, which pushed back on the state agency before finalizing a sexual harassment settlement with the EEOC over the objections of California.
“I think the biggest implication of the Activision case is that it gives a playbook for a company to contest whichever agency it isn’t happy with,” said University of Oregon law professor Elizabeth Tippett. “Tesla immediately saw that, based on the Activision precedent, they might gain an advantage by trying to present or exacerbate conflict between the agencies.”
The Tesla development also comes as California’s DFEH—which has stood out among state regulators as a fervent enforcer of workplace civil rights thanks to the state’s more protective employment laws—is facing a shakeup at its highest levels. California Gov. Gavin Newsom (D) recently fired the agency’s chief counsel, Janette Wipper, and the assistant chief counsel, Melanie Proctor, resigned in protest.
Legal scholars say the apparent turmoil between the DFEH and the EEOC over the prosecution of high-profile cases may give companies like Tesla a litigation strategy for avoiding potentially high-dollar state law claims by fighting California regulators and looking for a deal with the federal government.
Following Activision’s Lead
The DFEH sued Activision in Los Angeles Superior Court in July 2021, alleging a pervasive culture of sexual harassment that reached the highest levels of leadership. The litigation turned contentious with the state agency seeking police records on Activision executives and accusing the game maker of employing a “scorched earth litigation playbook” to contest the suit.
Activision fired back, calling the claims “distorted” and alleging an effort to “harass” and “embarrass” the company, before eventually settling with the EEOC for $18 million. DFEH fought that settlement, claiming it undercut its own state harassment claims, and said it will appeal.
Tesla has appeared to take a similar approach to the DFEH’s suit alleging racial discrimination at its Fremont, Calif., plant, by highlighting the divide between the regulators. A blog post on the Tesla website Feb. 9 called the lawsuit “misguided,” and an April 18 filing accused the state agency of using litigation as a “bullying tactic” to advance its turf war with the EEOC.
“DFEH ignored its statutory obligations and rushed to file suit against Tesla… perhaps out of fear that the EEOC would be the first to settle with Tesla,” the auto maker said in the April filing.
“I can totally see why Tesla would want to take a page from the Activision playbook,” said Lauren Teukolsky, founder and owner of plaintiffs’ firm Teukolsky Law, who said companies facing multiple suits may look for the best settlement. “We now know who the weaker plaintiff is.”
Neither Tesla nor Activision responded to requests for comment.
Industry watchers on both sides of employment litigation called the lack of agency cooperation and dueling enforcement actions an unusual and concerning pattern.
The conflict has rattled EEOC staff, according to John Fox, a partner with Bay Area management law firm Fox, Wang & Morgan P.C., who said he’s heard directly from them.
“They’re unhappy because they’ve always enjoyed good relations with the states, and particularly California,” he said. “California’s an important piece because it’s so large.”
Fox called the turf war “foolish.” “Both agencies have deep backlogs of other work—they can divide the markets and prosper,” he said.
An EEOC spokesperson said in an email that the agency values its “productive relationship with its state partners in a shared mission to prevent and remedy unlawful employment discrimination and advance equal opportunity for all in the workplace.”
DFEH told Bloomberg Law it believes its own actions are better suited to protect workers.
“DFEH has a decades-long history of successful collaboration with the EEOC in advancing our shared mission of protecting the rights of employees,” a spokesperson said. “We believe the state’s…