If those letters mean nothing to you, count yourself among the lucky. The less fortunate have shivers run down their spine at the mention of the Private Attorneys General Act of 2004.
PAGA authorizes employees to file lawsuits against their employers and recover civil penalties for labor code violations. Rather than working through the Labor and Workforce Development Agency, PAGA allows individuals to lawyer up and pursue legal action.
The concept has some merits. If an employer has violated the Labor Code and harmed his or her employees, corrective action needs to be taken. Waiting months or years for the Labor Commissioner and Attorney General to sort through complaints is not ideal for employees or employers.
But this isn’t how PAGA has worked out. Instead, it’s been used as a weapon by trial lawyers to extort settlements from small and independent businesses across the state. You can find a new example of PAGA abuse almost every day.
Recently, a Bakersfield business faced a $14.5 million lawsuit.
The alleged crime? Giving employees a safety bonus!
Because the hourly bonus wasn’t included in the regular pay rate for calculating employees’ overtime rate, this business faced a lawsuit that most of us can’t even fathom.
Sadly, this is just one of the hundreds of local businesses that have been PAGA victims.
The lawsuits often focus on minor violations that would be easy to fix. Things like accounting for lunch breaks, rest periods, travel to and from a worksite. Or, safety bonuses.
These are not evidence of malice. These are violations of the letter of the law, not the spirit of the law.
A few years ago, former Assemblywoman and small business owner Shannon Grove faced a $30 million PAGA lawsuit. Her employees’ paychecks included their pay date, but not pay period dates. Her business settled for $500,000.
These costly settlements affect business’ ability to increase wages, expand and create new jobs. It would be one thing if the settlements went to employees. However, the vast majority don’t.
KERO 23 ABC reported in 2016 that one company’s employees received only 31 cents each. The bulk of the settlement payment went to trial attorneys.
Last week, PAGA reform received its latest push when Assemblymember Vince Fong introduced AB 2016. AB 2016 has three major elements that would fix the most egregious aspects of PAGA: requiring more detail when filing a PAGA complaint, giving businesses more time to address most violations and requiring that an employee actually suffer a violation before they file a claim.
Currently, employees only have to include “facts and theories” when submitting a claim to the Labor and Workforce Development Agency. If the agency has not acted within 30 days, the aggrieved employee can pursue private action.
The employee’s attorneys begin working through company records. And in the process they find more violations and more aggrieved employees. All of a sudden, one disgruntled complaint over a typo on a paystub becomes a class action lawsuit with a laundry list of violations.
AB 2016 curbs this abuse by requiring a statement that includes the relevant facts, legal contentions and authorities that support each alleged violation. It also requires an estimated number of aggrieved employees. If the estimate is for 10 or more employees, it must be legally verified using the same procedures as other civil actions.
Requiring detail and legal verification raises the stakes for employees and trial attorneys. There should be consequences for PAGA fishing. Valid complaints and violations wouldn’t be affected, but frivolous lawsuits would find themselves locked outside the gates.
Secondly, AB 2016 would give employers 65 days to cure most violations. Currently, they receive 33 days. Most PAGA violations are technicalities that can be easily fixed. Extending the period to cure these violations allows employers to make a good faith effort to right any wrongs. AB 2016 also expands the scope of violations that can be cured to include most non-health and safety violations.
Lastly, AB 2016 limits the situations in which civil penalties can be awarded to violations where the employee actually suffered. Translation: if the dates on your paystub were wrong, you can’t sue for a timesheet violation. You can’t file a claim if you didn’t personally experience a violation.
AB 2016 represents a giant leap forward for small businesses in California. But, it’s just the latest in a string of attempts at PAGA reform.
In 2016, Assemblymembers Shannon Grove and Rudy Salas collaborated on a PAGA reform bill that stalled in committee. PAGA reform bills introduced in 2017 suffered a similar fate, including Salas’ AB 281, which was pulled from committee last month.
Last year, Sean McNally, president of KBA Engineering, was the proponent of three PAGA reform ballot initiatives. This January, they were withdrawn. McNally said in a statement that “there is great potential to negotiate a legislative compromise” for PAGA reform.
I hope AB 2016 is that opportunity.
It’s time for Sacramento to fix the PAGA mess it created and support the interests of employees and small businesses.