Gov. Gavin Newsom has signed newly passed legislation that aims to reform the Private Attorneys General Act (PAGA), which business groups have long criticized as a vehicle for rampant lawsuit abuse that offers little in the way of worker protections.
Newsom signed the legislation – Assembly Bill 2288, sponsored by Assemblyman Ash Kalra (D-San Jose) and Senate Bill 92 by state Sen. Tom Umberg (D-Santa Ana) – on July 1, saying the reforms were decades in the making and the result of business and labor groups coming together to secure a deal.
“... It’s a big win for both workers and businesses,” Newsom said in a prepared statement. “It streamlines the current system, improves worker protections and makes it easier for businesses to operate.”
PAGA allowed employees to file civil lawsuits to resolve workplace disputes in which employees argued they were not fully paid for overtime hours or allowed mandated lunch and break times. The result, however, has been large attorney fee amounts for trial lawyers and little in the way for compensation for wronged workers, critics said.
“PAGA was intended to give an aggrieved employee, one who believed they were not paid their full wages, a vehicle to receive their fair compensation,” Victor Gomez, executive director of California Citizens Against Lawsuit Abuse (CALA), said in an email to the Southern California Record. “Instead, it became a vehicle for trial attorneys to file shakedown lawsuits against employers for tens of thousands or millions of dollars for technical violations that ended up hurting both employers and employees.”
California CALA thanked the governor and lawmakers for reaching a deal that will make significant reforms to PAGA, according to a CALA statement.
“These reforms will essentially offer many of the ‘fixes’ California CALA has been advocating for since PAGA was signed into law by then-Gov. Gray Davis in 2004,” the California CALA statement says.
Gomez pointed to multiple abuses of the law, including lawsuits against employers for not placing a beginning and end date on check stubs, even though the checks were provided on time and were cashed without incident.
“PAGA lawsuits like this did wipe out businesses across our state due to frivolous lawsuits filed,” he said.
As a result of the reforms, businesses will see labor-law penalties capped when they quickly take action to resolve workplace policies and practices, according to the Governor’s Office. In turn, employers that act maliciously or oppressively to violate labor-law policies will receive higher penalties.
In addition, more of the penalty money that is collected – up to 35%, rather than the previous 25% – will go to aggrieved employees. And the state Department of Industrial Relations will be able to expedite its hiring to fill staff vacancies under the reform plan, leading to more efficient enforcement of worker labor claims, according to the Governor’s Office.
The reforms also reduce the statute of limitations in the filing of labor claims, a change that PAGA critics say will curtail excessive litigation.
“Many legislators have called the agreement reached to reform PAGA ‘monumental’ and we could not agree more,” Jennifer Barrera, president and CEO of the California Chamber of Commerce said in a prepared statement. “... The new policies coming out of the reform measures … will create more fairness in the process for small businesses and, importantly, incentivize them to understand and comply with labor laws that impact their workforce to the benefit of all.”