California State Agencies File Objections To Riot Games’ $10M Sexual Harassment Settlement

riot games new logo red bg bannerLast year Riot Games was slapped with a sexual discrimination class-action suit following Kotaku’s exposé of the prevailing “bro culture” in the studio. Riot Games agreed to a $10 million settlement in August 2019, the details of which were released in December later that year and is now awaiting approval by the court. Apparently, the drama doesn’t end there.

According to the LA Times, two state agencies have filed their objections to the initial pre-settlement agreement. The California Division of Labor Standards Enforcement (DLSE) filed a request to officially intervene in the case in late December. The DLSE argues that the plaintiff’s lawyers, Rosen Saba, failed to do their due diligence when they agreed to the terms of the settlement, which, according to the state agency, releases Riot from other potential labor law violations beyond the scope of the initial lawsuit, including but not limited to issues over minimum wages and overtime.

The California Department of Fair Employment and Housing (DFEH) also filed a document on January 8th claiming that both the monetary and non-monetary terms of the settlement were inadequate. According to the DFEH, the women of Riot Games could be entitled to potentially over $400 million in back pay based on the wage difference between men and women in the company. In addition, the agency also claims that “no enforceable changes to employment policies, at a company alleged to be rife with sexism, are part of the settlement.”

Both Riot Games and Rosen Saba have filed rebuttals to both the state agencies’ objections. Here’s Riot Games spokesperson Joe Hixson’s official statement:

“We worked hard to negotiate with the lawyer representing the class to reach an agreement that we collectively believe is fair for the class members. Now DFEH is trying to disrupt that agreement in a legal filing that is filled with inaccuracies and false allegations. We are particularly dismayed that the filing downplays and ignores the efforts we have made with respect to diversity, inclusion, and culture over the past 18 months. We look forward to making our case to the Court.”

The court will decide whether to grant the DLSE the right to intervene on January 31st. A judge will then decide whether to approve or reject the initial $10 million settlement on February 3rd.

Update: We attached the full Riot Games response to The California Department of Fair Employment and Housing (DFEH) objection here. The key objection is as follows:

The DFEH’s $400 Million Back Pay Estimate Is Reckless, Misleading, and Wholly Unsupported

The DFEH’s claim that the “maximum exposure in back pay owed to female employees alone exceeds $400 million” is outrageous, reckless, and without any basis in fact or law. Indeed, there are numerous methodological deficiencies in how the DFEH reaches this number, each of which makes the ultimate conclusion wholly unsound. First, the DFEH bases the $400 million number on an analysis of Riot’s raw “W-2 wage and tax records.” (Obj. at p. 1, n. 2.) Such a comparison is completely inconsistent with the analysis demanded by the Equal Pay Act, which mandates equal “wage rates” for employees who perform substantially similar work when viewed as a composite of skill, effort and responsibility. . . .” (Lab. Code § 1197.5(a), emphasis added.) As the DFEH surely knows as the government agency tasked with investigating pay equity claims, W-2 records do not accurately reflect individual wage rates suitable for comparison under the Equal Pay Act.

This is because the only “wage” information in the W-2 is the employee’s aggregate yearly “gross earnings” and “federal wages,” with no specification of which portions are attributable to the employee’s wage rate. For example, for hourly employees, the wage rate cannot be calculated without the number of overtime and double-time hours worked, which are not in the W-2. And for all employees, it is impossible to know what portion of earnings is attributable to base pay versus bonuses (e.g., a referral bonus), taxable expenses (e.g., relocation costs), or cash gross ups offsetting the taxes paid on such expenses.

Perhaps most significantly, the W-2 data does not distinguish between income from wages and income from equity-related taxable events, such as the exercise of nonqualified stock options (NSOs), settlement of restricted stock units (RSUs), or the sale proceeds of purchased options or RSUs. Includ- ing such income in a pay equity analysis improperly attributes to alleged wage discrimination what is most likely the result of equity-specific circumstances and individual decision points. Indeed, there are several circumstances that were unknown or uncertain to Riot, or out of its control at the time equity was granted, which may have ultimately impacted how equity-related income appears on the W-2s.