Obsidian Entertainment – a studio known for games like Avowed, Grounded, and The Outer Worlds 2 – is now facing legal troubles. The company is facing a class action lawsuit alleging that it has “engaged in a systematic pattern of wage and hour violations”. The lawsuit is being handled through a PAGA (Private Attorneys General Act) firm, and targets Obsidian for having broken the California Labor Code and Industrial Welfare Commission (IWC) wage orders.
The main argument of the lawsuit is that “non-exempt employees”, like QA testers, weren’t paid adequately for their time despite being forced to work overtime and having meal and rest breaks denied to them. The current iteration of the lawsuit is an amended complaint, which was filed in January 2026, with the original lawsuit having been filed all the way back in October.
In this lawsuit, Obsidian is being represented by Fisher & Phillips – a law firm known for focusing primarily on corporate defense, handling aspects like mitigating corporate risk, defending companies from employee lawsuits, and handling labor union negotiations, among other things. The primary defense by Obsidian’s lawyers, filed back in March, posits the idea that the affected workers had “consented to and/or acquiesced in the alleged conduct by Defendant of which Plaintiff now complains.”
The law firm is also attempting to ensure that this lawsuit never reaches the courtroom by trying to invoke a forced arbitration clause that would involve both sides of the suit entering arbitration instead of a courtroom with a judge.
The company has also filed a response where it “denies, generally and specifically, each and every allegation”, and has requested that the lawsuit be “dismissed in its entirety with prejudice”, which would mean that it could not be filed again.
The plaintiff has alleged that Obsidian’s practices resulted in increased profits, and that the company had failed to “pay all wages (including minimum wages and overtime wages).” Money that was supposed to be due “upon separation of employment,” as well as parts of regular wages, were also not being paid in a “timely manner”. Other alleged violations of employee rights include the lack of law-mandated rest breaks and not reimbursing “necessary business-related costs” or providing “accurate itemized wage statements”.
The class action lawsuit is open to be joined by “all persons currently or formerly employed by any or all Defendants as nonexempt employees in the State of California at any time between October 9, 2021 and the date of class certification,” and “all members of the Class who separated their employment with any or all Defendants at any time between October 9, 2022 and the date of class certification.”
The goal of the lawsuit is to seek “monetary relief” for those affected by Obsidian’s actions, which have also been described as wage theft. This relief includes “unpaid wages, unreimbursed business expenses, benefits, interest, attorneys’ fees, costs and expenses, and penalties” that it should face due to its violations of the state’s Labor and Civil Procedure Codes.
No more details about the lawsuit have come out since then, and neither Xbox nor Obsidian Entertainment have made any statements about the matter.