The California Civil Rights Department (CRD), formerly known as the Department of Fair Employment and Housing, was established in 1959 to protect workers’ civil rights through conciliation, mediation and settlement. However, over the years, the agency has lost sight of its purpose, leaving in its wake ever-growing numbers of devastated businesses and workers.

Today, rather than staying in its statutorily designated lane as mediator, the CRD operates as one of the least-civil civil rights agencies in the country. The increasingly aggressive and litigious agency often clashes with federal agencies, attorneys and even the victims the agency is tasked with protecting.

The CRD went off the rails in dramatic fashion in 2012, when then-Gov. Jerry Brown signed SB 1038 into law. Otherwise known as the “bounty hunter” provision, this law allows the CRD to bypass mediation and take cases directly to court. In practice, the agency is incentivized to pursue cases offering the highest financial return rather than those that would best serve the public interest.

CRD compounded this bad move by engaging private law firms with profit motives of their own to litigate, and in at least one case, even hired a firm with a direct conflict of interest.

Since the passage of SB 1038, CRD has also attempted to block settlements mediated by federal agencies. To do so, CRD hires private law firms to sue California companies. These cases often turn into million-dollar lawsuits, but the majority of the winnings don’t typically reach the plaintiffs. Instead, they land in the pockets of trial lawyers. Understandably, this combative approach has created a hostile environment for businesses, resulting in increased costs and a culture of fear.

A prime example of CRD’s overreach is its case against Activision. In 2021, Activision was close to settling a case with the federal Equal Employment Opportunity Commission. When CRD caught wind of this, it sued Activision before the deal could happen, in clear violation of the 1964 Civil Rights Act, which prohibits state agencies from derailing settlements for their own financial gain.

California Gov. Gavin Newsom responded by parting ways with Janette Wipper, the department’s chief counsel at the time, in an apparent attempt to rein in the overzealous agency. The governor’s rebuke seems to have had little effect as the wasteful and pointless appeal against the Activision ruling continues under the leadership of Wipper’s former boss, Kevin Kish.

Another example is CRD’s lawsuit filed against Tesla in 2022. The filing included a “thorough scalding of a company brand, beginning with its nonunion status,” but failed to provide any specific evidence behind the charges. Tesla proceeded to countersue the agency, alleging that it violated state law in initiating the suit. In its countersuit, Tesla said “CRD abused its discretion, acted in excess of its statutory power and authority, and failed to proceed in the manner required by law by promulgating and generally applying the rules.”

CRD’s strategy of going after businesses for minor or even unintentional violations is bolstered by the fact that many of the laws the department enforces are extremely subjective. For example, the state’s Equal Pay Act requires employers to pay men and women the same for “substantially similar work,” but it leaves the definition of “substantially similar” open to interpretation.

This noble-sounding approach has instead led to lawsuits against businesses for pay discrepancies that are based on factors other than gender, such as education or experience. Whether or not CRD prevails in the courtroom, the litigation alone can financially cripple small businesses targeted in these lawsuits.

It’s no wonder businesses are leaving California in droves in search of friendlier business environments in other states. For example, Toyota moved its North American headquarters from California to Texas, citing the state’s “difficult business environment.” Other businesses that have left the Golden State include Nestle, Jamba Juice and Carl’s Jr. And these businesses are taking thousands of jobs with them, devastating the state’s already-reeling economy.

As California Policy Center president Will Swaim put it, “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. The department’s rogue tactics are delaying settlements for workers and driving employers out of the state.”

California businesses need a fair and objective civil rights agency that will help them comply with the law and promote a business-friendly environment. If California wants to keep businesses in the state, CRD is in need of a fundamental culture change.

Kathy Hoekstra is a writer at Pacific Legal Foundation.