In a state full of harmful laws, one law has been more destructive than most: The Private Attorneys General Act (PAGA).
Businesses were cautiously optimistic in the fall of 2023 when Governor Newsom signed a package of PAGA reforms described as a “big win” for employers. But with a full-year of data now available to review, it’s clear that “PAGA Reform” needs more reforming.
PAGA, enacted in 2003, allows workers to sue employers over minor labor code infractions, like a misdated paystub, and imposes penalties of hundreds of dollars per violation, per pay period, multiplied across all affected employees.
These PAGA penalties add up quickly, with typical cases easily racking up five-, six-, and seven-figure potential consequences. Only a fraction of that money makes its way to workers; the lion’s share goes to the state of California and to the PAGA plaintiffs attorneys who profit off the system.
Several years ago, my organization commissioned a study on employee outcomes under this system. The results were less than impressive: Under PAGA court cases, workers were taking home less money, and employers were paying more–all as a consequence of a broken system that incentivizes abusive lawsuits.
These findings were followed by a larger business community advocacy campaign to “Fix PAGA.” The resulting deal, among other items, capped PAGA penalties on good-faith employers and bumped up workers’ share of the penalties up from 25% to 35% (with the State of California’s share of the PAGA payout decreasing from 75% to 65%).
But reform was also notable for what it didn’t touch: The incentive structure for PAGA attorneys to bring these claims and maximize their payouts. The majority of PAGA lawsuits are handled in mediation, where there are no guardrails or state oversight, and tremendous pressure to settle and reduce costs.
Read the full article here.