With a new poll that ranks California 47th out of 50 in cost of doing business, a new court ruling is prompting concerns about more Private Attorneys General Act (PAGA) cases being filed after the statute of limitations has ended.
“Since 2003, California’s PAGA statute unleashed an expansive wave of lawsuits by authorizing any ‘aggrieved employee’ to act as a private attorney general to seek penalties on behalf of the state against an employer for labor code violations,” Maryann Marino, Southern California regional director of California Citizens Against Lawsuit Abuse (CALA), told the Northern California Record by email. “In 2020, the California Supreme Court ruled that even though an employee settles a claim for recovery against the employer, that employee nevertheless remains an ‘aggrieved employee’ for purposes of bringing a PAGA case based on the previously settled violation.”
The state’s Fourth Appellate District decision in Johnson v. Maxim Healthcare, which was issued July 21, represents another setback for California businesses, Marino said.
“It extends the 2020 Supreme Court decision and now allows an employee whose own claim is barred by the statute of limitations to nevertheless bring a PAGA claim to represent a class of other employees based on same time-barred grounds,” Marino said. “These decisions strip away age-old legal protections requiring that a party personally have some legal interest in a claim to be able to bring a lawsuit. There will be no end in sight of when someone can file a PAGA claim against their employer.”
PAGA is a law exclusive to California and has been described as the cost of doing business here, while also representing much of the state’s workplace litigation.
“California employers need certainty. They need to know that the business they created years ago and the jobs created years ago will not be subject to an aggrieved employee who files a PAGA claim three years later, not meeting the deadline, but could still file a PAGA claim against her employer,” Marino said. “Unless the plaintiff has skin in the game there is nothing for them to lose, but the loss and harm is great for those being sued.”
The full impact of the Johnson ruling is still being determined; the state legislature has considered several bills that propose PAGA reform or exemption.
“California businesses face an already high burden with PAGA lawsuits,” Marino said. “In this case, the plaintiff had no standing; her claim had expired. This undermines the traditional legal fairness in having a statute of limitations, and it will only serve to expand the litigation against employers.”
A recent CALA study examined the cost of excessive tort litigation and opportunities for reform.
“When tort laws are misused, it results in closed businesses, lower wages, lost jobs, decrease in productivity and higher prices which are harmful to everyone,” Marino said. “Tort reform law would increase productivity, innovation and employment that would lead to increased productivity of $46 billion and 206,000 jobs for our state,” Marino said.
“Without these reforms businesses pay out billions in settlements, and the first thing a business does to come up with the settlement money is to start cutting jobs, reducing productivity and raising prices.”
Marino noted the Johnson decision is a natural and logical extension of the 2020 Supreme Court decision.
“Thus, it is likely that the Supreme Court would not review Johnson, or if it did, the Supreme Court would agree with it,” Marino said.
“The problem here is not rogue courts; the courts appear to be faithfully interpreting and applying a flawed law that was enacted by the legislature," Marino said. "PAGA is just a bad law with many harmful consequences. It greatly matters who the people of California elect to the Legislature and to be Governor."