SACRAMENTO – National Federation of Independent Business (NFIB) Small Business Legal Center in Sacramento attorney Luke Wake said reform of the Private Attorney's General Act (PAGA) is one its priority concerns for small-business owners in California.
PAGA was enacted in 2003 and allows private attorneys to act on behalf of the state in enforcing detailed labor laws upon small-business owners. These attorneys are then permitted to sue businesses for any violations, even small issues such as a company not listing its full legal name on a pay stub. No matter the size of the issue, the company must pay $100 for each employee pay period for one violation and $200 for each employee pay period for any following violations, among other potential consequences.
Wake commented that the NFIB considers PAGA a serious problem.
NFIB attorney Luke Wake
“PAGA and PAGA reform is a priority concern for NFIB,” Wake said. “It’s very concerning that you might potentially face a really catastrophic lawsuit for essentially any labor code violation, however minor it is and regardless of whether anyone has actually suffered an actual injury.”
Chairman of the Family Business Association of California and Caterpillar dealer Holt of California president Ken Monroe published an op-ed in The Orange County Register in July offering suggestions on reforming PAGA.
Monroe’s article calls for three major actions to reform PAGA: giving employers 90 days to resolve the issues before any court action is initiated, capping attorney fees to ensure benefits go to employees for significant violations, and reforming labor regulations so employers can give their workers flexible lunch hours and breaks.
“Successful economies need an ongoing economic engine to create wealth,” Monroe said in his article. “Here in California, family businesses play a major role making California the fifth-largest economy in the world. But our state’s economic engine is being choked back by a whole host of state laws and regulations, so the legislature should at least take some modest steps to strengthen our economy. PAGA reform would be a good place to start.”
Monroe also wrote that Holt of California was once sued for allowing employees to schedule their own lunches in order to sit with close co-workers, no matter how many hours they work per day without a lunch break.
Wake commented on how it is “essentially impossible for businesses to be 100 percent compliant 100 percent of the time” and that PAGA is “not good for small-business owners who are trying in good faith to be compliant in a very difficult environment.”
Wake believes the best motion is to adjust PAGA so that small-business owners who make “good faith mistakes,” or very minor infractions with good intentions, will not potentially lose their entire business due the hefty financial costs of court action.
“I think not just limiting that concept of PAGA, but in general, when there’s good faith violations of arcane regulatory requirement, the right thing to do is to allow a reasonable opportunity to fix the error,” said Wake. “[Attorneys] shouldn’t drop the hammer on someone with excruciating penalties with a potentially damning lawsuit simply because someone made a good faith mistake.”
Wake also mentioned how small-business owners in California should challenge legislators in order to save their operations.
“As with your house that will slowly get cluttered up over time, regulation will slowly begin to get out of control over time unless you’re proactive and tidy enough,” Wake said. “The regulators here, and the state legislatures in particular, seem to only be interested in piling on, and that’s problematic.”