Along with movie production and technology, California now leads the nation in mass layoffs. The numbers are stark, California has currently laid off more than three times as many employees in mass layoffs this year than Texas, America’s second largest state. Recent research produced by the California Business and Industrial Alliance points to the culprit: the Private Attorneys General Act (PAGA).
PAGA allows employees to bring lawsuits against employers on behalf of themselves, other employees, or even the state of California. While originally conceived to protect employees working in under-the-table businesses, PAGA lawsuits have significantly increased since the law was implemented and target regular businesses, often for minor offenses.
Another failure of PAGA to benefit employees is revealed by looking at the impact of PAGA lawsuits on the viability of legitimate businesses and the job security of their employees. According to research by the California Business and Industrial Alliance, employers subjected to PAGA lawsuits were far more likely than employers not sued to issue a WARN notice – a notice signifying a mass layoff of 50 or more employees, or a company going out of business.
The numbers are clear. Employers subject to a PAGA settlement were 258 times more likely to issue a WARN notice in fiscal year 2021/2022, and 126 times more likely to issue a WARN notice in fiscal year 2022/2023.
The average PAGA settlement cost for each of these employers was almost $4 million in the past fiscal year, with an average attorney fee of over $1 million. In other words, an unexpected cost of approximately $5 million for the businesses impacted – something that would have a disastrous effect on all but the biggest corporations.