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It’s one of the most stressful documents a California business owner can receive. That certified letter containing a formal complaint from the California Civil Rights Department (CRD), the agency formerly known as the DFEH.
This notice means a current or former employee has filed a formal charge against your company, likely alleging discrimination, harassment, or retaliation.
Your first instinct might be to panic. You might be tempted to call the employee to “clear the air” or draft a long, emotional email defending your actions.
Stop.
Doing any of those things can create significant, and often irreversible, legal liability for your business. How you handle the first 48 hours is paramount. This is not an HR issue; it is a legal event that sometimes serves as the prelude to a potential lawsuit.
Consideration 1: Do Not Retaliate. Period.
The single most expensive mistake an employer can make is to retaliate against the employee who filed the complaint (the “complainant”). Filing a CRD complaint is a “legally protected activity”.
It is illegal to fire, demote, discipline, or otherwise punish an employee because they filed a complaint. This is the fastest way to turn a weak discrimination claim into a very strong, and very costly, retaliation claim.
“Retaliation” is defined broadly. It’s not just termination. It can be any “adverse action” that might deter a reasonable employee from engaging in protected activity. Examples of illegal workplace retaliation in California include:
- Unjustified negative performance reviews.
- Transferring the employee to a less desirable shift or location.
- Reducing the employee’s work hours or pay.
- Excluding the employee from meetings, projects, or team lunches.
- Giving the employee the “silent treatment”.
Step 2: Issue a Formal “Litigation Hold”
From the moment you receive that CRD complaint, you are on notice of a potential lawsuit. This means you have a legal duty to preserve all evidence that is “potentially relevant” to the dispute. This is a “litigation hold.”
You must immediately instruct your IT department and relevant managers to suspend all routine document destruction policies. This includes auto-deleting emails, clearing Slack or Teams histories, or shredding old personnel files.
Evidence to preserve includes:
- The complainant’s complete personnel file.
- All emails, text messages, and internal chats (Slack, Teams, etc.) related to the complainant or the allegations.
- Performance reviews, disciplinary warnings, and pay records.
- Copies of your employee handbook and anti-harassment policies.
- Contact information for all potential witnesses.
Destroying this evidence, even accidentally, can lead to “spoliation of evidence,” where a court could instruct a jury to assume the destroyed evidence was harmful to your case.
Step 3: Engage Experienced Employment Defense Counsel
A CRD complaint is a legal document. You need a lawyer. Your first call should be to an experienced California employment defense attorney.
Do not try to conduct your own investigation or interview witnesses first. Any conversations you have before engaging an attorney are generally not protected. The attorney’s first act is to create an “attorney-client privilege”. This privilege protects your confidential communications with your lawyer, allowing you to have a frank and full discussion about the case, the facts (both good and bad), and your legal strategy.
Step 4: Notify Your EPLI Carrier Immediately
This is the non-obvious step that can save your business. Most companies have Employment Practices Liability Insurance (EPLI), which covers claims like discrimination, harassment, and wrongful termination.
Nearly all EPLI policies are “claims-made” policies. This means the policy only covers claims that are both made against you and reported to the carrier within the same policy period.
A CRD complaint is a “claim”. A catastrophic mistake is waiting until you are formally sued—which could be a year later—to report it. By then, your policy may have expired, giving the carrier a valid reason to deny coverage. This would leave you paying all defense costs and any potential settlement out-of-pocket, which can easily run into six figures. Send a written notice, including a copy of the complaint, to your insurance broker immediately.
Step 5: Analyze the Complaint and Calendar Deadlines
With your attorney, review the “Notice of Charge of Discrimination.” You will need to identify:
- The Deadline: You typically have 30 days from receipt to file a formal response. Your attorney must calendar this.
- The Allegations: What is the employee claiming? Discrimination, harassment, retaliation?
- The “Protected Class”: The claim must be based on a protected characteristic, such as race, age (40+), sex/gender, disability, medical condition, etc.
- The Respondents: Is the complaint just against the company, or does it name managers individually? In California, managers can be held personally liable for harassment.
Step 6: Conduct a Prompt and Impartial Investigation
Under California’s Fair Employment and Housing Act (FEHA), employers have an affirmative duty to “take reasonable steps to prevent and correct” discriminatory or harassing behavior. Receiving a complaint triggers your duty to investigate.
This investigation must be prompt, impartial, and thorough. It must be conducted by a qualified investigator—this can be a trained internal HR professional, an outside attorney, or a licensed private investigator. This investigation involves interviewing the complainant, the accused, and witnesses, and then reaching a factual conclusion.
However, this “internal” investigation has a major vulnerability: if you are sued and try to defend your company by saying, “We investigated and found no wrongdoing,” you may have waived the attorney-client privilege over that investigation file, turning it over to the plaintiff’s lawyer.
Step 7: Conduct a Separate, Attorney-Client Privileged Investigation
To avoid the waiver trap, your defense counsel must conduct their own parallel investigation for the dominant purpose of providing you with legal advice. This investigation—including witness interviews and document review—is protected by the attorney-client privilege and work-product doctrine.
This allows your attorney to find the “bad facts” and assess your true liability without creating a discoverable road map for the other side. When your attorney interviews employees, they will issue an “Upjohn Warning,” clarifying that they represent the company, not the employee, and that the company controls the privilege.
Step 8: Understand the CRD Mediation Pathway
Along with the complaint, the CRD will offer its free, voluntary mediation program. This presents the first major strategic fork in the road. Your legal counsel will analyze several key factors to determine the best path for your business.
The Typical Roadmap:
- Opting In: If you and your counsel agree to participate in mediation, the CRD will “toll” (pause) the 30-day deadline for your formal Position Statement.
- The Process: The mediation itself is a confidential process facilitated by a neutral CRD mediator. It is fast and free, often resolving in a single day.
- If it Fails: If the mediation does not result in a settlement, there is no harm to your legal position. You simply exit the mediation process and are now required to submit the formal Position Statement.
- If it Succeeds: If an agreement is reached, the CRD will draft a settlement agreement to resolve the case.
Key Considerations for You and Your Counsel:
- Confidentiality of the Settlement: This is a critical factor. While the mediation discussions are confidential, the CRD’s official policy states that, “in general, DRD settlement agreements cannot be made confidential“. Your attorney will need to weigh the benefit of a fast, free resolution against the fact that the terms of the settlement will likely be public. A private settlement negotiated later in litigation can be made confidential.
- Required “Affirmative Relief”: A CRD mediation is not just a financial transaction. The CRD requires that all mediated settlements include some form of “affirmative relief”. This is a non-monetary commitment, such as agreeing to conduct new anti-harassment training, revising your employee handbook, or posting notices in the workplace.
- Special Case (Small Employers): For small employers (5-19 employees) facing a complaint about family leave (CFRA), bereavement leave, or reproductive loss leave, the CRD’s mediation program is mandatory for the employee before they can file a lawsuit. This is a powerful and free tool for small businesses to resolve these specific claims.
Step 9: Craft a Strategic “Position Statement”
If you decline mediation, or if it fails, you must submit a formal Position Statement. This is the single most important document you will file. It is a legal brief, not an informal letter.
Crucially, the CRD (and its federal counterpart, the EEOC) has a policy of sharing your Position Statement with the complainant and their attorney.
This document becomes a free preview of your entire legal defense. It locks you into a factual narrative. Any inconsistency between your Position Statement and a manager’s testimony 18 months later will be used to destroy their credibility in court.
An effective Position Statement, drafted by counsel, must be:
- Factual and Objective: Address every allegation from the complaint with a specific, factual response.
- Evidence-Based: Attach and reference key documents that support your position (e.g., the anti-harassment policy, the complainant’s negative performance review that predates the complaint).
- Non-Emotional: Vague denials (“we deny everything”) or emotional attacks (“the complainant is a liar”) are useless and make you look guilty.
Step 10: Understand the “Right-to-Sue” Notice
In most cases, after reviewing the Position Statement, the CRD will close its file and issue the complainant a “Right-to-Sue” notice.
Many employers see the “Case Closed” notice from the CRD and believe they have “won.” This is a fundamental and dangerous misunderstanding.
A Right-to-Sue notice is not a finding of innocence. It is simply the ticket the employee needs to file a civil lawsuit against you in court. You are not “out of the woods”; you are entering them.
The 10-step process above is not about “beating” the CRD. It is about ensuring that when that Right-to-Sue notice arrives, your insurance is in place, you have no retaliation claim against you, and your legal defense is already built and ready to go.
Receiving a CRD complaint is a serious legal event. The team at Nowland Law has spent over 20 years defending California businesses and navigating the CRD process. If you have received a complaint, do not wait. Contact our offices at (949) 221-0005 to schedule a consultation.