Bounty Hunter Provision Drives CA Civil Rights Dept. Strategy that Hurts Workers & Drives Businesses Out of State

SACRAMENTO —  A California Policy Center report released today reveals that financial incentives allowing California’s Civil Rights Department (CRD) to fund its budget through attorney fees has created a monster. Today’s CRD has turned into a litigious bully that steps over plaintiff workers and strong arms companies for the department’s own financial gain — and civil rights protections in California are paying the price.

The CPC report, Enforcing Civil Rights: Does a Regulator’s Profit Motive Benefit the Public Interest?, examines how the evolution of the CRD has hurt both plaintiff workers and businesses in California and outlines what actions the legislature can take to right what’s wrong. 

“The Civil Rights Department’s focus should be on helping workers who experienced civil rights violations, not shaking down deep-pocketed employers to fund the department’s budget,” said California Policy Center president Will Swaim. “The department’s rogue tactics are delaying settlements for workers and driving employers out of the state.”

Next week, the California Assembly Budget Committee will meet on April 18, 2023 at 1:30pm for their regular oversight over CRD’s budget for the year. The Senate Budget and Fiscal Review Committee review follows on Thursday, April 20, 2023 at 9:30am.

The department previously known as California’s Department of Fair Employment and Housing (DFEH) — renamed the Civil Rights Department (CRD) in 2022 — was founded to be the state’s bulwark against discrimination, charged with investigating and resolving bias claims. FEHA’s founding statutes require the department to advance the cause of civil rights through conciliation, mediation, and settlement. 

Over decades, CRD lost touch with those principles. Today, CRD is less an objective factfinder or mediator of disputes, and has instead become an increasingly aggressive and litigious regulator, butting heads with federal counterparts, civil rights attorneys, and even the victims of harassment and discrimination it was founded to protect. 

CRD’s penchant for derailing settlements delays both compensation for victims and the implementation of policy changes to prevent discriminatory practices. And the department’s campaigns of corporate brand assassination are driving businesses — both employers who have been steamrolled by CRD and others who see the writing on the wall — out of California.

Contributing to the dramatic shift is SB 1038, which created a “special fund” connected directly to the department — outside of the state’s general fund — into which court awards or settlement would be deposited for support of the department’s budget. Often called a “bounty hunter” provision, it “creates an incentive for agencies to pursue cases and strategies with higher rates of financial return rather than the public interest, in the hope of sharing some of the reward.” 

Subsequently, CRD has become more aggressive, often “bigfooting” its way into major cases, the report explains, “figuratively stepping on and over plaintiffs and other regulators who developed the case — to take control and potentially reap the rewards”:

• In the high-profile case against video game producer Riot Games, DFEH stepped in to block a pending settlement and made a headline-grabbing demand of $400 million. The final Master Settlement allotted DFEH between $5-$8.5 million in attorney fees and costs. 
• DFEH fought to block another substantial settlement led by the federal Equal Employment Opportunity Commission (EEOC) against video game manufacturer Activision Blizzard, causing a “turf war” between the two agencies that the judge called “a bit unseemly.” Despite the eventual settlement of the case, DFEH continues to appeal the ruling, delaying resolution for the plaintiffs.
• And in a lawsuit filed against Tesla in 2022, DFEH’s filing included a “thorough scalding of a company brand, beginning with its non-union status” but provided little in the way of specifics on evidence behind the charges to which Tesla could respond — likely because CRD was rushing to beat federal attorneys at the EEOC to the punch. 

ACTION NEEDED: CRD is most in need of a drastic culture change, but simple and practical legislative changes are also needed to encourage quicker, more efficient resolution of cases, more immediate elimination of discriminatory practices, and to get compensation to victims faster while improving California’s business climate.  

California Policy Center recommends the Legislature consider the following revisions to the Fair Employment and Housing Act (FEHA) and SB 1038:

• Repeal the FEHA’s “bounty hunter” provision. There should be no link between the department’s budget and the money it amasses in penalties, judgements, or settlements. 
• Reestablish the adjudicatory function of the former Fair Employment and Housing Commission. The Legislature should supply administrative law judges to handle cases, rather than leaning on litigation. 
• Require CRD to pursue cases through administrative rather than civil action or at a minimum clarify that Director’s complaints must still meet legal standards for civil actions.
• Clarify and reinforce FEHA’s due-process standards. The accused should be afforded time to review, respond, and engage in good faith settlement talks prior to formal accusations. 
• Clarify existing requirements that complaints and causes of findings shall include evidence and facts that lead to the department’s finding of a violation or violations and shall be issued to the accused.
• Increase transparency of state legal settlements. The Controller or individual agencies should report to the Legislature annually on judgments received via litigation and what happens to those funds.