SACRAMENTO – Luke Wake, attorney with the National Federation of Independent Business (NFIB) Small Business Legal Center commented on the state Supreme Court's recent ruling involving the Private Attorneys General Act (PAGA) that workers cannot seek the recovery of wages that they claim were unpaid in civil lawsuits, and the underlying issue of the labor code in California.
“It's been a big deal for the small business community," Wake said. "One of the extremely unfortunate aspects of PAGA is that it amplifies the problems that are created in a regulatory environment that is as complex and difficult as the California Labor Code creates. The reality is that it's impossible to be 100 percent compliant 100 percent of the time as complicated as the labor code is, and if PAGA is authorizing lawsuits for any private attorney to bring on behalf of the entire class of employees over very minor code violations even when no one has been hurt by it, that does create an environment that is difficult.”
This environment has been particularly hard for small businesses, Wake said, as inconsequential issues have become the normal grounds for lawsuits in California.
“Small business employers already live in fear of being sued over good faith regulatory violations and so long as PAGA exists in its current form, that's going to remain a risk or concern,” Wake said. “I am cautiously optimistic about the ruling, though I hesitate to say that this is going to result in dramatic changes in the trends that we've seen, but a lot of the trends have been over back wages which I think will go away, but a lot of the PAGA litigation has been over mundane non-compliance issues.”
In another ruling, Orange County Superior Court Judge Peter Wilson narrowed a California Business and Industry Alliance’s (CABIA) lawsuit regarding the legality of PAGA on Sept. 11. Wilson ruled that CABIA failed to demonstrate how PAGA allegedly violated the separation of powers and due process rights, Courthouse News Service reported.
CABIA is continuing to push for reform of PAGA, in order to protect smaller entities from frivolous legal action.
“The proof of the pudding will be seen in what kind of litigation follows and if there is a decrease,” Wake said.