California’s business groups and labor interests have seemingly done the impossible: struck a deal to reform one of the state’s worst laws, the Private Attorneys General Act (PAGA).

The agreement could provide a lifeline to the countless employers who have been unfairly targeted by the threat of PAGA lawsuits. The key to success is drafting clear language to guard against misinterpretation by trial lawyers and the courts.

PAGA took effect in 2004 to address an enforcement shortfall at the state’s labor department, allowing workers to hold bad actors accountable without requiring state resources to investigate each violation. However, the significant financial incentives for filing PAGA lawsuits — which award one-third or more of the total payout to the plaintiff’s counsel — turned the system into a gold mine for trial lawyers. As a consequence, PAGA lawsuits, and threats of lawsuits, exploded.

In 2023, nearly 8,000 PAGA notices were filed with the California Labor and Workforce Development Agency, a 34% increase from the previous year and a nearly 400% increase over the prior decade. Since 2013, at least $10 billion has been paid out in PAGA settlements, with billions going into the pockets of trial lawyers who file these claims.

PAGA abuse was aided, however unintentionally, by the courts. That’s why it’s so important to get the language right in PAGA reform.

Consider the issue of standing (whether an employee has the right to sue his or her employer under PAGA). Looking at PAGA’s legislative history, final bill analysis and group of original proponents, it’s clear that the law was intended for plaintiffs who suffered actual harm for an alleged violation of the state’s labor code. But trial lawyers convinced the California Supreme Court to adopt a broader view of standing, where employees could sue for alleged violations even if no harm had been suffered.

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