SACRAMENTO – The state of California faces challenges following the creation of a law that seeks to protect employees from workplace violations committed by employers, while the system makes reform difficult to enact.
California lawmakers are attempting reform to the Private Attorney General Act, otherwise known as PAGA, which was introduced in 2004 as a means of protecting employees from being treated unfairly in the workplace.
Unfortunately, current interpretations of the Act have taken it to extremes that lawmakers never intended and left employers in a vulnerable state, lawyers state.
Ben Ebbink, labor and employment attorney with Fisher Phillips in Sacramento, gave some insight into the Act and what has happened to its execution in the 14 years it's been around.
"PAGA has been pretty controversial from the employer-community perspective. I think there's a couple of different ways that it is problematic," Ebbink told the Northern California Record. "On the one hand, it establishes some pretty significant penalties for any violation of the labor code, no matter how small. PAGA, in theory, creates a civil penalty based on the number of employees times the number of workweeks they work, and that can be pretty significant if you have a sizable workforce."
Ebbink explained that a challenge of the Act is that it has a no harm requirement, leaving employees with a wide scope of complaints that they can make.
"That lends itself to what I would characterize as abusive litigation practices, where you have plaintiff attorneys who find very technical or hypersensitive violations of the labor code and because they can use PAGA, they can calculate huge potential penalty damages against the employer to exert a settlement out of them," Ebbink said.
The California Legislature has not been without advocates for the employer, though, as Assemblyman Vince Fong has introduced several attempts at reform that would actually provide employers with an opportunity to fix said violation before being penalized.
Mandana Massoumi, partner at Manatt, Phelps & Phillips LLP in employment and labor, spoke to the issue and why PAGA is in need of reform.
"The California Chamber of Commerce has backed a lot of these efforts, such as an assembly bill which also supported an extension of the period of cure, so that employers have a more realistic window time of when to respond and an opportunity for remedial action before engaging in litigation," Massoumi told Northern California Record. "One of the other assembly bills that Assemblymember Fong introduced last year even attempted to set a cap on the amount of recovery."
Massoumi feels that these efforts are all appreciated by employers as it gives more guidelines for what employees can sue for, rather than allowing PAGA to be a free-for-all.
"So many of these PAGA litigation cases are focused on technical violations where, for example, some amount of information is missing from a pay stub. It's not necessarily that the person wasn't paid, but that the pay stub is missing information that totals the total amount of deduction, even though the deductions are made," Massoumi said.
And while reform is most certainly needed, the current system protects the Act in a way that reform will be difficult to enact, Simon L. Yang, labor and employment associate at Seyfarth Shaw LLP explained, even though the Act has been twisted and misused for years.
"One thing that is important to understand is there is so much settlement leverage given to PAGA plaintiffs that PAGA claims rarely make it to trial. The same applies to a lot of class-action matters, but again, one of the uncertainties that PAGA presents is, 'What is the finality that a PAGA judgment might have?' Since PAGA claims are rarely tried through to a judgment, there is less opportunity for appellate review, which also results in less opportunity for any sort of authority to address open-ended questions of reform," Yang told the Northern California Record. "There probably is no lack of employer and other lobbying groups' requests to address PAGA."
Reform is still being presented in various assembly bills, though no drastic change has come to PAGA as of yet.