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Private Attorneys General Act (PAGA)

The Labor Code Private Attorneys General Act (PAGA) authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for Labor Code violations.

Your employees and their would-be attorneys were given a tremendous power by the State of California in 2004, although it took them and the rest of the legal community a little while to figure out this awesome gift. The law, titled the Private Attorney General Act of 2004 (“PAGA”), gives employees in California the right to bring a lawsuit against their employers for any violation of the California Labor Code. In short, it allows employees to step into the shoes of an enforcement agency like the Division of Labor Standards Enforcement and recover civil penalties on behalf of the California Labor Workforce Development Agency (“LWDA”) for aggrieved employees and their coworkers.

PAGA was originally enacted to help the state regulate its underground economy; those businesses that operate unlawfully outside of tax and licensing requirements. Thus, proponents argued that it allowed employees and employee advocates to help the state catch brazen wage violations.

But PAGA also allows employees to sue for almost every Labor Code violation, not just serious violations or those dealing with health and safety. And that aspect of the law was where the value of PAGA as a litigation tool was eventually recognized by the plaintiff’s bar. Here’s why a PAGA claim can be so much more harmful to an employer than a regular Labor Code violation or Unfair Business Practices claim.

CHANGES UNDER P.A.G.A. PAGA has two main components that affect employers. First, PAGA gives employees the authority to sue as so-called Private Attorneys General to recover these monetary penalties for an employer’s violation of the Labor Code. Before the enactment of the PAGA, employees could not bring civil actions in court to enforce non-monetary provisions in the Labor Code; only the State Labor Commissioner through the Division of Labor Standards Enforcement (“DLSE”) could do so.

The second component of PAGA is that it imposes monetary fines on employers for each violation of almost every single provision in the California Labor Code. If the Labor Code does not already provide for a penalty, the PAGA imposes on the employer a $100 fine for the first violation and $200 for each subsequent violation of the same provision. These fines can be assessed for each employee or for each pay period, when applicable. If the Labor Code already provides for a civil penalty for the underlying violation, the employee can sue to recover that penalty on behalf of similarly aggrieved employees.

With PAGA allowing employees to sue for non-monetary violations as private attorneys general and further allowing those employees’ attorneys to recover 100 percent of their attorney’s fees for prosecuting such lawsuits, a whole new world of potential defendants and claims opened up. Employees would get the relief they wanted – better lighting, cooler air, and chairs to sit on – and attorneys had the monetary incentive to help employees do it.

When PAGA claims began gaining popularity among the plaintiff’s bar, the first target was large employers where working condition violations were purportedly occurring. As but one example, the retail chain 99 Cents Only Stores was hit with a PAGA lawsuit regarding its failure to provide cashiers chairs to sit in while they waited for customers to ring up. The California Court of Appeal upheld a trial award under PAGA to plaintiff for the violation, and further cemented the idea that PAGA could be used as a profitable tool to bring suits for non-monetary employment violations.

WHAT CAN EMPLOYERS DO? Perhaps the best way for employers to avoid liability for violations of the Labor Code pursued under a PAGA suit is for employers ensure their business are in full compliance with the Labor Code. This is not, however, an easy feat given the complexities of understanding and interpreting the Labor Code and the Industrial Welfare Commission (“IWC”) Wage Orders as they relate to a particular employer’s business.

Many employers believe they are in complete compliance. But there are thousands of provisions in the Labor Code, all of which now can present an expensive trap for employers who are not careful. And because the Labor Code incorporates provisions from other codes, the list seems to keep on growing. One provision that is causing costly problems for employers is the suitable-seating provision of Section 14 of the IWC Wage Order 7-2001. Never heard of it? You are probably not alone. The formerly little-used provision requires employers to provide seating for their employees under certain circumstances. But in the past few years, California has seen an increase in the number of wage-and-hour class action lawsuit against retailers over the lack of “suitable seating,” with the aforementioned 99 Cents Only Stores case as the notable vanguard of those cases.

Of course, under PAGA, the lawsuits have not been and will not be limited to the claims of lack of suitable-seating. The IWC also requires some employers to provide lockers or changing rooms, others must display clocks in certain work areas, and there is even a provision on the proper temperature at which certain employers must keep employee bathrooms. Some of these other types of working condition issues are already being litigated. Expect the remainder to become the subject of lawsuits as employees and attorneys discover them as catalysts for a PAGA suit and identify the appropriate employer targets.

Finally, as the past decade has seen the use of arbitration provisions in employment agreements be challenged in California courts, among the decisions disfavoring enforcement of employment arbitration agreements includes a 2014 finding by the California Supreme Court that an employment arbitration provision could not require that PAGA claims be arbitrated instead of litigated in court. This decision was somewhat surprising in light of recent appellate holdings that employees could validly contractually waive the right to bring employment class action lawsuits and be forced to arbitrate putative class claims against employers.

PAGA is clearly gaining strength as a tool for plaintiff’s employment attorneys. In light of this, employers should be preemptive in aggressively attempting to identify potential bases for claims against them of non-monetary Labor Code violations. Once identified, those issues should be quickly remedied. Otherwise, the first and last notice to an employer that a potentially-costly problem exists will be in the demand letter sent on behalf of an aggrieved employee by his or her attorney.