Less than three months after being acquired by Microsoft Inc., Activision Blizzard Inc. is settling a prominent lawsuit with the California Civil Rights Department.

The agency’s suit was filed in 2021 and alleged that Santa Monica-based Activision had denied promotion opportunities to female employees and paid them less than men for the same work, thereby violating the state’s Equal Pay Act and Fair Employment Housing Act. The CRD officially withdrew its suit on Dec. 20 in order to “avoid the time, expense and uncertainty of future litigation,” and stated that no court or independent investigation found any evidence to substantiate the claims of harassment and discrimination. As part the settlement, Activision will pay $54.8 million to cover litigation costs and other fees.

The CRD also announced that it found no evidence that Activision’s board or its then-chief executive, Bobby Kotick, improperly handled reports of misconduct or harassment. Kotick, who has led Activision since 2008, officially departed the company on Dec. 29. 

Approximately $45.8 million of the settlement payment will go to a fund to compensate female employees who worked at the company between Oct. 21, 2015, and Dec. 31, 2020. A source familiar with the matter said that female employees will be eligible for compensation regardless of whether they filed a claim of workplace misconduct or discrimination.

The CRD noted that Activision has maintained “positive measures” to monitor and improve company practices and publicly published its first annual transparency report in May last year. Activision will be required to distribute excess settlement funds to charitable organizations that focus on advancing women in the gaming and technology industries or on promoting awareness of gender equality issues in the workplace. It will also retain an independent consultant to evaluate the company’s compensation and promotion policies, which will paid for by Activision.

“We are gratified that we have reached an agreement with the California Civil Rights Department today,” an Activision spokesperson said. “We appreciate the importance of the issues addressed in this agreement and we are dedicated to fully implementing all the new obligations we have assumed as part of it.”

Walkouts

A large Activision employee walkout occurred after the CRD filed its lawsuit in July of 2021, and more than 1,000 workers signed and published a petition to remove Kotick from the company. Microsoft announced its intent to acquire Activision in January of 2022 and, after pushback from several global regulators, the deal officially closed on Oct. 13 for a reported $68.7 billion.

The CRD will also be dropping its Ninth Circuit appeal to a lawsuit from the U.S. Equal Employment Commission that Activision settled in March of 2022. The EEOC suit alleged that Activision “subject(ed) employees to sexual harassment, pregnancy discrimination and retaliation.” As a result of that settlement, Activision established an $18 million fund for eligible claimants and expanded both its Ethics and Compliance team and its Ethics Ambassador Program.

“We are committed to ensuring fair compensation and promotion policies and practices for all our employees, and we will continue our efforts regarding inclusion of qualified candidates from underrepresented communities in outreach, recruitment and retention,” an Activision spokesperson said.

The company has not yet announced who will take over following Kotick’s departure. Kotick served as chief executive of video game publisher Activision Inc. from 1991 to 2008 and later played a crucial role in the organization and execution of a merger with the gaming division of French entertainment company Vivendi SE, including its subsidiary Blizzard Entertainment Inc., which created Activision Blizzard Inc. Under his control, Activision has become one of the largest and most profitable video game companies in the world. Kotick said in a note to employees that the Microsoft deal will set Activision up for continued success in the gaming industry and that Phil Spencer, chief executive of Microsoft Gaming, has long appreciated Activision’s strengths.

“I cannot adequately express the pride I have in the people who continue to contribute to our success and all those who have helped throughout my 32 years leading this company,” Kotick said. “Phil shares our values and recognizes our talents … as we move into our next exciting chapter, Activision could not be in better hands.”

According to a 2022 filing, Kotick is entitled to a $14.4 million payment if he departs Activision due to a change of company control, a clause that was in his contract before the Microsoft deal began. Activision declined to comment on the exact amount of Kotick’s termination payment.