It was a record-breaking year for California’s PAGA (Private Attorneys General Act) in 2023, with nearly 8,000 notices filed, even after a 2022 U.S. Supreme Court ruling found PAGA is subject to terms of the Federal Arbitration Act.
The highly controversial PAGA statute has been the bane of many California businesses, which have found themselves facing court action, at times for no real infractions, and it continues to fuel a cottage industry of plaintiff’s attorneys who critics say rake in fees, while generating few real benefits for workers.
The Duane Morris firm includes PAGA analysis in a recent report on the larger overall state of class action litigation in the U.S.
“According to data maintained by the California Department of Industrial Relations, the number of PAGA notices filed with the LWDA has increased exponentially over the past two decades, from 11 in 2006 to 7,780 in 2023,” the report states.
Many employers bemoan the state of affairs, report author Gerald Maatman, a partner and chair of Duane Morris’ Workplace Class Action group, told the Northern California Record by email.
“They get sued more in California and it costs more to settle the cases or lose them," Maatman said.
Since the 2022 SCOTUS ruling in Viking River, several California Supreme Court rulings seem to defy the SCOTUS determination by broadening PAGA’s impact, and state lawmakers haven’t advanced reforms save for exempting certain unionized industries from PAGA’s reach.
Meanwhile the LWDA data speaks volumes.
“Success begets copycats – plaintiffs’ counsel are exceedingly successful in this space and are making lots of money in settlements,” Maatman said.
The California Supreme Court late last month also ruled against what had become a potential PAGA defense – case manageability.
“Some lower courts dismissed PAGA cases based on this defense. Now the defense is unavailable,” Maatman said.
The state justices in the unanimous Estrada v. Royalty Carpet Mills decision ruled PAGA claims cannot be struck – dismissed with prejudice – on manageability grounds. Even if hundreds of claimants are involved.
The Estrada trial court ruling had found that PAGA actions have a manageability requirement, but California’s high court struck that down.
“[O]ur precedent makes clear that PAGA permits a plaintiff to have representational standing to seek penalties on behalf of individuals who have allegedly suffered violations that vary widely in nature,” the high court wrote.
The court also addressed the defendant’s argument as to due process: “While certain characteristics of some PAGA claims, occasioned by the statute’s broad standing rules and the lack of need for common proof or class certification, may present trial courts with challenges in ensuring that a defendant’s due process rights are preserved, we express no opinion as to the hypothetical questions of whether, and under what circumstances, a defendant’s right to due process might ever support striking a PAGA claim.”
The high court’s Estrada ruling, which was issued Jan. 18, could still possibly allow employers to pursue dismissal on due process grounds.
“It remains to be seen,” Maatman said. “The argument would be that being forced to defend an array of unrelated claims based on PAGA is so fundamentally unfair that it deprives a defendant of due process. This likely will be relevant the bigger the group of workers at issue.”
Oral arguments are expected this spring in another PAGA case now before the California Supreme Court, Turrieta v. Lyft. The high court website states the justices will consider if a plaintiff in a representative action filed under PAGA has, “the right to intervene, or object to, or move to vacate, a judgment in a related action that purports to settle the claims that plaintiff has brought on behalf of the state.”
The Duane Morris report also notes that The Fair Pay and Employer Accountability Act – to address equity and replace PAGA – will go before California voters on the Nov. 5 ballot: “Under the proposed law, employees could not sue for civil penalties in court on behalf of the state and instead would have to file a complaint directly with the Labor Commissioner who would be a party to any lawsuit filed; all recovery of civil penalties would go to affected employees; the State would receive increased funding; and civil penalties would be doubled for ‘willful’ violations. The measure is intended to eliminate the windfall profiteering that the plaintiffs’ bar has enjoyed from the PAGA. Although preliminary polling suggests voters support the measure, the plaintiffs’ bar surely will mount vociferous opposition.”