Private attorney general lawsuits are ‘absurd’ and ‘out of control,’ say reformers

By Rodric Hurdle-Bradford | May 5, 2016

SACRAMENTO - The state’s Private Attorney General Act (PAGA) is in need of amending, according to civil justice reform advocates.

The 2004 law – which gives any private citizen the right to act as an attorney general in any municipality or county - was enacted to prevent employers from shorting workers’ pay and other labor law violations.

But now, its use is “out of control,” according to Kim Stone, president of Civil Justice Association of California (CJAC).

Stone said she supports legislation introduced by Assembly woman Shannon Grove (R-Bakersfield), designed to limit PAGA lawsuits, also known as "Sue Your Boss" litigation.

Shannon Grove   Twitter

On Wednesday, the Assembly Labor and Employment Committee was scheduled to hear a slate of reform measures - Assembly Bills 2461, 2462, 2463 and 2464.

Grove said that PAGA laws were initially introduced as a “fundraising” mechanism for the state, but they have since been transformed into a “personal lottery” for many private citizens.

After penalties are collected, 75 percent of funds go to the State of California's Labor and Workforce Development Agency and 25 percent goes to the employee who brought the case.

"These PAGA laws benefit a lot of Los Angeles lawyers who come in from other districts to legally rape and pillage business owners in my district," Grove said.

"We have thousands upon thousands of PAGA cases statewide and it is absurd litigation. I have talked to several attorneys for a real-world perspective of these cases and they agree that it is absurd litigation."

A Sacramento attorney who defends employers said he believes that PAGA “creates more problems than it solves."

"The lawsuits I am defending are of very technical of nature and minor details about paperwork or process that are damaging small businesses that are paying large settlements," said Chuck Post, chairman of Labor and Employment for Weintraub & Tobin.

For example, he said that minor details forming the basis of a lawsuit are often wage statements, or paychecks.

Post added that any discrepancy including an address mistake in the parent company's printed headquarters or any other typographical error can result in a PAGA lawsuit from a current or former employee.

The bills:

-  Assembly Bill 2461 would limit PAGA lawsuits to violations of meal, rest, rest recovery periods, overtime or overtime pay and meal breaks after five and 10 hours. These are violations that directly affect the employee's welfare and do not jeopardize the financial future of a small business or corporation all over small technicalities, many of which are printing errors.

"The idea is to limit scope to show harm," Grove said.

-  Assembly Bill 2462 would allow the business owner or corporation the right to cure any violation of the labor code before the employee can bring a civil action. The time for adjustments can save businesses thousands and even millions of dollars over minor violations.

"This time period is definitely needed to adjust to a law that has really gotten out of control," Stone said. "We fully support this bill because it addresses a longtime problem that needs to be addressed."

-  Assembly Bill 2463 would cap the penalty of a violation at $1,000 per violated employee. Currently, violations can have penalties of up to $100 and $200 per employee per pay period, which can multiply fast and cost employers six figures or even over a million dollars at a quick rate.

"Employees are not getting the money from these judgments the lawyers are the beneficiaries," Grove said. "Then you end up with scenarios like 1,000 employees splitting $250,000."

-  The final assembly bill, may have the most reach and influence. Assembly Bill 2464 would authorize a court to dismiss an action if, after notice and hearing, the court finds that the aggrieved employee suffered no appreciable physical or economic harm.

This bill would address the constant problem of businesses being targeted by employees over misprints and typographical errors on their paychecks, paystubs or direct deposit forms, Grove said. Combined with Assembly Bill 2463, it would eliminate the practice of a misprint or typographical error being multiplied over hundreds or thousands of employees over multiple pay periods costing a business millions of dollars in litigation payment over no real reason.

"Nobody wants employees under abuse or employers to get away with things," Grove said. "I believe that everyone should work in good faith to eliminate these frivolous lawsuits."

Attorney Post agrees that PAGA as it is currently constructed does not exhibit the necessary efficiencies that it was intended to have when it was implemented as law.

"The penalty and cost of defending the lawsuit is catastrophic to many business owners," he said. "The unimportant parts of this law really need to be identified and changed."

Discussion of PAGA laws on Wednesday and identification of the issue by Gov. Jerry Brown gives Grove hope that the efficiencies could be cleaned up and implemented in the second half of 2016.

"This could drastically reduce someone getting fired and running to a lawyer for no reason," Stone added. "And that benefits all Californians."


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