If you have free time on your hands and enjoy reading, California’s bevy of rules and regulations are a good place to start. The Labor Code alone is hundreds of pages long. And, thanks to California law, each minor infraction of the Labor Code’s endless complexities allows alert trial lawyers to swoop in and throw the book at you.
This is primarily because of a 2004 California law known as the Private Attorneys General Act, or PAGA for short. The law allows any “aggrieved employee” to pursue legal action against an employer for themselves and their coworkers to enforce labor laws on behalf of the state. Meant as a solution to the relatively limited resources afforded to the state, it allows employees to file suit and collect civil penalties, with 75% going to the state and 25% going to the plaintiff.
However, rather than acting as a tool to protect workers across California, PAGA is now more often used so the attorneys involved can collect hefty fees, leaving the employees they are supposed to be representing with very little compensation. In one well-documented PAGA lawsuit, lawyers representing employees collected more than $2 million from the case’s settlement while the employees received just $1.08.
Providing such a powerful profit incentive for lawyers not only contorts PAGA’s initial intent but also threatens the ability of small-business owners to continue operating and providing jobs to people in their communities.
The first PAGA violation levied against a business costs $100, and every subsequent violation takes that amount to $200. These fines can be stacked per violation, per employee, and per pay period. So every small, obscure, unintentional infraction of the California labor codes on overtime wages, working through lunch, timestamp irregularities, or any number of other violations can add up to tens of thousands of dollars — even millions. Even a simple mistake like putting a company’s P.O. Box, rather than physical address, on a pay stub can result in a PAGA violation.
Unable to afford a lengthy legal battle and even less equipped to deal with the financial devastation of losing a fight against a PAGA claim, owners of small businesses are usually forced into expensive settlement agreements that represent a significant cost to employers and hinder their ability to hire more employees or even to continue doing business.
Stanislaus County businesses are no exception to this trend. Here, our communities are full of thriving businesses and aspiring business owners looking to launch their ventures here. However, their goals are harder to achieve under PAGA. Several well-known, award-winning businesses in our county have spent millions settling PAGA lawsuits, taking that money away from being able to reinvest in their businesses and employees, not to mention in our community.
It’s time that we, as a community, call upon state leaders to fix issues with PAGA claims. We need to tighten the loopholes that provide unscrupulous lawyers an incentive for ripping off their clients and make it easier for businesses to understand the hundreds of dense and vague labor rules that govern them. Even simply making wage rules more understandable would do wonders for PAGA complications.
PAGA lawsuits represent an existential problem for businesses across the county and may very well be the biggest litigation threat they face today. However, if we do work to fix it, California can continue to be a landing destination for entrepreneurs, and Stanislaus County can become home to new business ventures.
Kristin Olsen is a Stanislaus County supervisor and a founding board member of New Way California. She previously served as Assembly Minority Leader in the California State Legislature.