An appeal disputing the constitutionality of the PAGA (Private Attorneys General Act) has been filed in the Fourth Appellate District, arguing that the trial court misapplied an earlier court challenge to the controversial statute.
The opening brief in California Business and Industrial Alliance [CABIA] v. Xavier Becerra, filed May 11, says new facts and theories are distinct from Iskanian v. CLS Transportation, which the trial court had relied on in its decision, Tom Manzo, founder and president of the California Business and Industrial Alliance, said in an email response to the Northern California Record.
“Iskanian primarily ruled that pre-dispute arbitration agreements were not enforceable for PAGA actions because the State is the real party in interest (and the State hasn’t agreed to arbitrate),” Manzo said. “Iskanian also opined that there is no separation of powers violation with PAGA, but the Court only considered an analysis of the legislature versus the judiciary, and the parties did not provide a full briefing on the issue.”
The CABIA case asserts that the legislature deprives the executive branch of its prosecutorial discretion to enforce California’s labor laws through civil penalties.
“Because there is nothing in PAGA that requires executive branch review of a PAGA notice,” Manzo said, “the notice itself is insufficient to provide any real review, and PAGA fails to provide sufficient right to control private litigants by intervening or other means.”
Manzo noted this relegating of state prosecution power has led to substantial PAGA abuse that continues unchecked.
“In fact, the state executive branch agencies directly responsible for labor law enforcement (and the review of PAGA notices) have admitted that they review less than 1 percent of the notices they receive,” Manzo said. “We believe that this fact, which was not acknowledged until a couple of years after the Iskanian decision, is dispositive of the separation of powers issues – i.e., PAGA does not provide sufficient executive branch control over the private plaintiffs (and their attorneys).”
Following CABIA’s opening brief, the state’s opposition brief will likely be filed by later this summer. Oral arguments could be held by end of the year or early in 2022, with a decision shortly thereafter.
“Thousands of businesses are hit with PAGA notices each year, and countless more are subject to extortionate demand letters,” Manzo said. “CABIA's motivation is simple: PAGA is a massive problem, and there was no political will to fix it. Instead of complaining about it, we decided to do something about it.”
Manzo said PAGA has been misclassified as an employee-friendly law.
“According to a new study from the former head of DIR (Department of Industrial Relations) under Gov. Brown, and the former head of Cal/OSHA under Gov. Schwarzenegger, the outcomes for employees under PAGA lawsuits are worse than if they had worked through the state. In short: Employees get less, employers pay more, and the lawyers get richer.”
Supporters of PAGA reform have noted it requires a comprehensive approach.
“This lawsuit is one tactic in our strategy, and even its existence has helped publicize the problems with PAGA,” Manzo said. “A successful appeal would be a big win for small business, and put the trial bar on notice: Your days of getting rich through shakedown PAGA suits are coming to a close.”