Talks between business and labor groups aimed at co-sponsoring a bill to reform the California law known as PAGA broke down recently, and it appears the legislative session will end with no action to change a law one lawmaker said leaves many businesses “no other choice but to pay expensive settlements, file for bankruptcy, lay off workers or leave the state.”
That’s how Assemblyman Rudy Salas, D-Bakersfield, described the Private Attorneys General Act, sometimes known as the “Sue Your Boss” law, which allows an employee to bring a civil action against an employer for a violation of the Labor Code that would otherwise be enforced by the state. PAGA lets any person effectively stand in the shoes of the attorney general and crack down on companies that commit violations of labor laws.
PAGA was signed by outgoing Gov. Gray Davis in 2003. At the time, the state’s budget crunch left little money available for workplace law enforcement, and PAGA was said to be a way of increasing compliance with the law without burdening the state’s taxpayers.
The law added civil penalties to workplace law violations for the first time and allowed prevailing employees to collect attorneys’ fees as well as civil fines. The number of such actions has increased exponentially over the past 15 years.
Although a handful of laws have been passed since 2003 to try to address problems with PAGA, reform has been halfhearted. That may be due to PAGA’s generous split of the monetary penalties – 25 percent to the affected employees and 75 percent to the state treasury. Nice little business they’ve got there.
The rest of the state’s businesses aren’t enjoying it as much. PAGA created civil liability for even minor, technical infractions, such as failing to correctly print dates or a business address on a pay stub. Settlements for hundreds of thousands of dollars are not uncommon. For large companies with sophisticated human-resources departments, PAGA is bothersome, but for small businesses it can be ruinous, contributing to California’s well-earned reputation as a hellhole for employers. The budget crunch is over, and it may not be necessary to enforce workplace laws through this unique legal arrangement. PAGA should be reconsidered.
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