☆ SJ lawyers: Labor code violation suits rampant, often baseless, costly for law-abiding employers
Pieter Brueghel: The Village Lawyer’s office, 1618. Image by Wikimedia Commons
Silicon Valley Law Group's Bernie Vogel and Ed Kraus unpack how California Legislature's at a crossroad regarding the Private Attorneys General Act (PAGA), which lets workers frivolously allege and sue their employers for labor code infractions (even when there's little to no evidence of technical violations), essentially extorting costly settlements from their bosses. Vogel and Kraus point out that PAGA can easily bankrupt Bay Area business owners via unfounded lawsuits that, in the meantime, line local plaintiff lawyers' pockets. An Opp Now exclusive.
In a twist of political fate two decades after the recall of Governor Gray Davis, California finds itself once again at the center of a contentious battle—this time over the Private Attorneys General Act (PAGA). Davis signed the landmark law in the waning days of his gubernatorial term back in 2003. Ever since then, PAGA has been a continuous topic for debate between labor unions, trial attorneys, and business groups. This joins other private right of action consumer statutes that have caused tremendous cost and expense to small business owners, real property owners, and employers.
In an obvious nod to his supporters in unions and trial attorneys, Davis championed PAGA as a tool to empower workers, allowing them to file lawsuits against their employers for allegedly violating state labor laws.
What PAGA has done is taken minor technical violations or disputed issues and made them cost prohibitive for the employer. PAGA has encouraged litigation and clogged up the courts, which are already at full capacity.
Businesses large and small have long criticized PAGA, viewing it as a license for predatory lawyers to pounce on employers with costly lawsuits. This sentiment continues to echo in the corporate landscape all throughout the state. Trial lawyers have been using PAGA to their advantage for decades, forcing business owners into costly settlements. People are fed up with the outcome of business owners having to suffer and settle with claimants who make overly exaggerated or false labor claims. Many of the onerous impacts of PAGA could be ameliorated with a longer notice period of violation to allow the employer to cure any issues before the filing of a lawsuit. The current timeline is simply too short for bigger employers to cure certain violations.
In addition, currently any employee can bring a claim. What's more, an individual can sue on behalf of all employees, obtaining penalties that were once the sole purview of the State and limited to the one aggrieved employee.
This should be limited in a way so that only serious and egregious claims can fall within PAGA. In one infamous PAGA minor technical claim, a company was hit with a PAGA lawsuit for merely not having its company name on the detachable stub of its paychecks. Did not the employee know that they worked at the company? Did the courts need to be wastefully burdened by this minor error? Was it necessary to create a claim on behalf of all employees when many of the employees did not even notice or care about the minor technicality?
In the years following its enactment, the back-and-forth battle over PAGA has seen both unions and employers working hard to shape and reshape the bill's impact. Business owners are working to undo Davis’s legislation to protect their livelihoods from frivolous lawsuits, and unions and attorneys are working overtime to increase PAGA's efforts.
A crucial turning point came in 2018 when the State Supreme Court expanded PAGA's reach by restricting employers' ability to classify workers as independent contractors exempt from labor laws. The legislature solidified this decision with Assembly Bill 5 (“AB5”), sparking a heated debate that reached voters in 2020 when ride-hailing companies successfully lobbied for an exemption. The definitional increase expanded PAGA’s reach as employers' use of independent contractors was greatly diminished by the Supreme Court decision that redefined the classification of employee versus independent contractor and AB5.
Last year, the battle continued as Governor Gavin Newsom signed two bills expanding PAGA's reach. One allowed workers to refuse work if conditions were unsafe, while the other mandated employers to disclose wage scales. Again, PAGA allows for private enforcement of penalties so when such penalties in labor are expanded, so is PAGA. Yet, amid these legislative arguments, the U.S. Supreme Court delivered a partial victory to employers by limiting PAGA's application to workers bound by pre-employment arbitration agreements.
Even with that small victory for businesses, two more PAGA battles are on the horizon—one in the State Supreme Court and another at the ballot box in 2024.
The former involves an Uber Eats delivery driver alleging unlawful denial of cost reimbursement, with questions arising about the impact of the U.S. Supreme Court's arbitration ruling on whether the driver could utilize PAGA in this case. Simultaneously, the Californians for Fair Play and Accountability, a coalition of business and employer groups, has submitted signatures and seeks to repeal PAGA entirely through a 2024 ballot initiative.
Employers argue that PAGA has become a vehicle for lawyers to collect fees while providing little benefit to workers with legitimate grievances. And rightfully so, since there are examples of PAGA abuses all over the state and businesses having to close their doors due to being hit repeatedly with frivolous lawsuits by disgruntled employees and overreaching lawyers. However, even if the initiative succeeds and PAGA disappears, the broader conflict over the balance of power between workers and employers is unlikely to subside.
As the Golden State prepares for the imminent debate on this legislation, employers face significant consequences, with the future of PAGA crucial to their livelihoods. The state is set for another battle in the ongoing conflict over the rights of workers and employers. It is overdue for the law to be redefined and reversed, or at least as a minimum, provide longer notice protections or create stricter standing requirements for the plaintiffs to bring a PAGA claim.
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