Kern’s Sacramento delegation, joined by House Majority Leader Kevin McCarthy, is voicing fresh optimism it can leverage bipartisan support this legislative session to help reform a 2004 measure that has been used to negotiate hefty legal settlements from dozens of local businesses accused of wage theft.
Fighting what critics call “legal extortion” stemming in some cases from technical errors on paycheck stubs, lawmakers led by Assemblywoman Shannon Grove, R-Bakersfield, are working with senior Democrats in the state Legislature to make changes to the Private Attorneys General Act of 2004, better known as PAGA.
Hopes are high in part because Gov. Jerry Brown expressed a willingness in January to reform PAGA, which allows individuals to sue employers in cases where the California Labor Commissioner's Office has declined to prosecute cases alleging state Labor Code violations such as paying less than the minimum wage and denying workers breaks.
Probably the biggest sign changes may be coming to PAGA this year is the support Senate President Pro Tempore Kevin de León, D-Los Angeles, has expressed for trailer language in the 2016-17 state budget bill. It would require a judge to approve any proposed settlement of a lawsuit involving alleged Labor Code violations. Among other changes, it would also give employers 33 days to correct errors and thereby stave off lawsuits.
Some of these measures, including the 33-day window to “cure” violations, have been championed by Grove since at least the last legislation session. She has withdrawn a series of PAGA reform bills in an effort, she said, to reach a compromise with Democrats.
Grove accuses Southern California class-action lawsuit specialists of targeting more than 100 Kern oil and ag businesses because of their large payrolls. She said her Bakersfield staffing company paid hundreds of thousands of dollars to settle a PAGA lawsuit alleging wage theft. Settlements paid by other local companies have exceeded $1 million.
Although Grove stopped short of predicting victory this legislative session, the assemblywoman ticked off a list of state lawmakers supporting the PAGA reform drive: de León; Senate Minority Leader Jean Fuller, R-Bakersfield; state Sen. Andy Vidak, R-Hanford; Assemblyman Rudy Salas, D-Bakersfield; Assemblyman Devon Mathis, R-Porterville; and “many others.”
“We are doing our best to reform this litigious law,” she said. “We’re hopeful but we don’t know what we’ll get.”
McCarthy said he recently went to Sacramento to discuss PAGA reform with the governor’s staff, as well as de León and Assembly Speaker Anthony Rendon, D-Paramount.
“I know this is a state issue, but this is affecting jobs,” McCarthy said. “This is harming California’s business climate.”
He added it may make sense for someone from the majority party in Sacramento to sponsor the bill rather than a Republican like Grove.
“We need the Democrats to carry this. It needs to be their bill,” he said. “(But) at the end of the day, when the bill passes, it’ll be because Shannon worked so hard on this.”
SHAKEDOWN OR JUSTICE?
PAGA’s defenders, including the California Employment Lawyers Association and the International Brotherhood of Teamsters labor union, say the root problem is employers cheating workers out of money. They also point a finger at state government, saying PAGA wouldn’t be necessary if only the state labor commissioner had a sufficient staff to take on cases by itself.
Barry Broad, legislative director for the California Teamsters Public Affairs Council, which has supported limited changes to PAGA, said companies that feel they have been served with a frivolous lawsuit should take it to court, because “fact is, no employer has to settle anything.”
One of the state’s largest class-action lawyers, San Diego-based William Turley, who has an office in Bakersfield, said Grove “has it backwards. In Kern County, the employers are targeting the employees.”
The number of PAGA notices filed with the state Labor and Workforce Development Agency — a preliminary step on the way to filing a lawsuit against an employer — has shot up in recent years.
According to the Legislative Analyst’s Office, such filings totaled 7,626 in 2013, a 72 percent jump from three years earlier. In 2014 the annual total fell to 6,307. More recent figures were unavailable.
Several local businesses have spoken publicly about being caught up in costly PAGA cases after committing what they consider to be minor, unintentional mistakes such as failing to properly specify pay periods or print accurate company names on employee pay stubs.
In September 2014, five former employees of Bakersfield-based oil field service company Truitt Oilfield Maintenance Corp. filed a class-action suit alleging wage and various other Labor Code violations. It was estimated workers were owed about $275,000 in back wages, interest included.
But with associated PAGA penalties added on, the Truitt’s potential liability was calculated at more than $7 million. The company agreed to settle the case for $1.125 million.
“The plantiffs’ attorney used the PAGA penalties as leverage to force a settlement,” Truitt’s general and administrative manager, Greg Gutierrez, said by email.
Dan Corriea, owner of Shafter-based Weststar Trucking, said his company, too, has been sued for alleged PAGA violations. But instead of settle, he has spent two years and $450,000 fighting it.
“It’s just legal extortion,” Corriea said.
Sen. Fuller said she, Grove and McCarthy are intent on filling gaps in state law that allow misuse of PAGA.
“Laws that allow lawsuit abuse against businesses must be fixed with a common-sense approach,” Fuller said in a written statement.
Grove plans to provide a legislative update on efforts to reform PAGA during a free lunch June 24 at The Petroleum Club of Bakersfield, 5060 California Ave. The event is being hosted by California Citizens Against Lawsuit Abuse, a business advocacy organization promoting tort reform and changes to the California Environmental Quality Act.