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California’s Civil Rights Department is tasked with enforcing the state’s civil rights laws that protect Californians from discrimination in the workplace and housing. In the last several years, however, the agency has gone rogue — becoming infamous for bringing vexatious, profit-motivated litigation against companies for the sole purpose of funding the department’s own budget, even at the expense of the victims themselves.
Dubbed the “bounty hunter” provision, a law passed by the state Legislature in 2012 allows the CRD to have its own special fund into which settlements can be directly deposited into the department’s budget. The law also allows CRD to bypass mediation and bring cases directly to court on a contingency basis in order to pursue the highest financial return.
Not unlike California’s notorious Private Attorneys General Act, or PAGA, the “bounty hunter” provision incentivizes private law firms that specialize in class actions to sue companies for millions of dollars on behalf of CRD, reaping big bucks for the agency and for trial attorneys, based on trivial or unintentional violations of the state’s voluminous labor code, among other state and federal laws.
The CRD’s aggressive approach is another cog in California’s heavily regulated business environment, causing companies to flee in droves to friendlier pastures out of state. According to Stanford University’s Hoover Institute, departures of corporate headquarters doubled in 2021 from the prior year, and at least 352 companies have left California since 2018. Among the departures include Cisco, Telsa, Oracle, and Palantir. CRD’s ruthless tactics against businesses have contributed to the exodus.
Known up until 2022 as the Department of Fair Employment and Housing, the agency has drifted afield from its founding mission during the height of the Civil Rights movement, in some cases actually clashing with state and federal agencies, plaintiff’s attorneys, claimants, and even Gov. Newsom.
For example, a turf war between agencies ensued in 2021 when CRD derailed an agreement between video game company Activision Blizzard and the federal Equal Employment Opportunity Commission in an $18 million settlement on sexual harassment claims. CRD’s continued meddling and trying to get a piece of the action has delayed resolution for the claimants and prompted Gov. Gavin Newsom to fire CRD’s then-chief counsel in a failed attempt to reign in the department.
In 2020, the department shoehorned itself into a $10 million settlement agreement between video game producer Riot Games and a group of female employees who alleged gender discrimination. The department, along with the state’s Division of Labor Standards Enforcement blocked the settlement, demanding an eye-popping $400 million that both the plaintiffs and defendants disputed.
After Riot Games finally agreed to a $100 million settlement, both departments ended up with millions in their coffers. The final settlement allotted CRD up to $8.5 million in attorney fees and costs.
California Policy Center president Will Swaim said it best when he stated that CRD’s focus should be on “helping workers who experienced civil rights violations, not shaking down deep-pocketed employers to fund the department’s budget.” The department’s rogue tactics, he said, are “delaying settlements for workers and driving employers out of the state.”
California’s Civil Rights Department isn’t the only state agency that views businesses as perpetual cash cows with targets on their backs. Previously led by Acting U.S. Secretary of Labor Julie Su, California’s Employment Development Department aggressively pursues small- and medium-sized businesses for alleged misclassification of independent contractors across hundreds of categories of professions, raking in massive fines and penalties that can put mom-and-pop businesses out of business.
Having squandered nearly $40 billion in fraudulent unemployment insurance claims during the pandemic, the EDD has every incentive to pursue aggressive payroll tax audits and ramp up enforcement of the disastrous and draconian Assembly Bill 5 law, which has destroyed the livelihoods of hundreds of thousands of independent professionals in California since its enactment in 2020.
If California wants to keep businesses from leaving the state in record numbers, one place to start is the much-needed reform of CRD. A recent report by California Policy Center sets forth some solutions, including repealing the bounty hunter provision; reestablishing the adjudicatory function of the former Fair Employment and Housing Commission; and requiring CRD to pursue cases through administrative rather than civil action.
And while we’re at it, let’s repeal AB 5 and PAGA once and for all and return some sanity back to the Golden State instead of continually criminalizing businesses large and small out of existence.
Karen Anderson is the founder of Freelancers Against AB5.
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