California’s so-called “sue your boss law” of 2004 allowed private attorneys to handle employee labor code violations, and they’ve made it pay off.
Known as the Private Attorneys General Act (PAGA), the law enabled the attorneys rather than the state to represent employees in violations like the misprint of an employee’s name on a pay stub or not enough break time. But according to some now seeking to reform the law, claims usually move more slowly and have smaller payouts for employees, largely benefiting attorneys and the state instead.
“Today’s PAGA system is completely broken and does not work well for employees or employers,” California Chamber of Commerce President and Chief Executive Jennifer Barrera said in a press release last week.
Announcing a new report by the Fix PAGA coalition—which includes community, disability, and health advocates and experts—Ms. Barrera advocated for a better way of handling labor disputes.
“A better system would allow employee claims to be evaluated and resolved by existing state agencies, providing faster resolution and more restitution for workers, while preventing abusive lawsuits that harm both employees and employers,” she said.
Key findings in the report showed workers receive three times larger payouts when their claims are reviewed by the state’s Division of Labor Standards Enforcement (DLSE) or Labor and Workforce Development Agency (LWDA), which both regulate the state’s workforce.
The typical award from PAGA court cases averaged $1,264 per employee versus $3,613 per employee through DLSE, or even as much as $6,438 per employee when filed through DLSE’s Bureau of Enforcement—which takes more time and is an investigatory team for some of the state’s “most prevalent and violative bad actors,” according to the report.
When it was introduced in the early 2000s, PAGA was intended to assist the DLSE, which at the time was underfunded and not keeping up with claims, but that is no longer an issue, according to the report. Under PAGA, employees collect 25 percent of penalties awarded while the state receives 75 percent—an incentive used to persuade the Legislature to pass the law—but opponents now say attorneys have manipulated the system to limit government funds and keep more for themselves.
As it currently stands, PAGA adds unnecessary, expensive legal representation to cases that could be filed without a lawyer through the state, the report says. Average cases now award attorneys 33 percent or more of a workers’ total recovery, as much as $369,882 on average, and in some cases, attorneys have been awarded up to 40 percent for fees, as outlined in the report.
Going through the state is also faster, with claims taking 10 months on average versus 23 months for PAGA court cases.
An initiative aiming to repeal PAGA has already qualified for the November 2024 ballot, according to the coalition, and members said they are ready to work for passage.
Individual Cases
For some business owners, the costly lawsuits are enough to avoid the California market, which was the case for television personality, American chef, and restaurant owner Andrew Gruel, who told The Epoch Times one of his restaurants was hit with a PAGA lawsuit as soon as it opened.“What was incredibly frustrating with ours was it was the first day we opened. So we had an orientation day where we were doing nothing more than introducing menu items,” Mr. Gruel said.
On the form for the PAGA claim, some of the violations were failure to pay overtime, sick time, and two weeks’ vacation, but the employee hadn’t yet worked more than two full shifts before he was let go for not following company policy, according to Mr. Gruel.
“It’s a shakedown by trial attorneys,” he said.
At a recent trade event, Mr. Gruel said he hadn’t met a single chef or restaurant owner in California who hasn’t been hit with at least one of the lawsuits. He learned that sometimes employees see ads on Instagram that guarantee money if they have been fired, with generalized forms to fill out.
“What I’ve heard from my team members is that these trial attorneys basically solicit employees with ads on Instagram,” he said.
It was enough for him to leave the California market despite being an Orange County native.
“I’ve owned and operated up to 10 businesses in California. I will never open another business in California until this goes away,” he said.
According to Victor Gomez, executive director of the organization Citizens Against Lawsuit Abuse, , PAGA lawsuits have increased 250 percent in the last 10 years, with over 6,000 filed last year compared with only about 1,700 a decade ago.
He said he agrees with the approach by the Fix PAGA coalition to let state agencies handle more cases, because that would put more money in the pockets of employees rather than trial attorneys.
But Mr. Gomez sees trial attorneys standing in the way.
“The trial lobby in Sacramento is very strong. They have a lot of money, obviously. … We see all their commercials and billboards everywhere,” he said. “They certainly don’t want to see PAGA fixed because fixing it means they don’t make money.”
