PAGA: The battle for employers continues

Enforcement tool? Well, the lawyer's answer -- it depends on who you ask. The Private Attorneys General Act of 2004 was originally enacted to allow private citizens to "help" the state of California enforce the Labor Code, which in turn was intended to improve the working conditions of employees. As the name suggests, PAGA provides a mechanism by which an employee may be "deputized" as a private attorney general and bring a civil lawsuit against their employer or former employer on behalf of themselves and other "aggrieved employees." Through a PAGA action, the court has the discretion to award civil penalties that would have otherwise only been assessed and collected by the Labor and Workforce Development Agency, with 75% of the PAGA recovery to go to the LWDA and 25% to go to the aggrieved employees.

With criticism from the get-go, 15 years later, PAGA remains controversial and its impact on employers continues to increase. Many argue PAGA has not served its purpose nor improved the working conditions of employees. Rather, it has drained employers' time and financial resources and in turn has actually harmed the workers PAGA was meant to protect. PAGA has taken a toll on thousands of California employers who have either been hit with a PAGA action or the threat of a PAGA action. Most PAGA actions result in settlement because for many employers to fight even the most frivolous claims through trial does not make financial sense, and for others, the threat of the potential PAGA penalty exposure and attorney's fees recoverable for minor violations could force a business to close its doors.

Despite the many PAGA actions that result in settlement, there are several PAGA matters that have been heavily litigated. Many of these decisions have expanded the reach of PAGA, such as precluding a PAGA action from proceeding by way of arbitration. This year alone, two PAGA cases made their way to California's highest court, Kim v. Reins International California, Inc., S246911, and ZB, NA v. Superior Court, 2019 DJDAR 8825. As we await the Kim decision, the court issued a welcomed decision in ZB (a PAGA plaintiff may not recover allegedly unpaid wages through PAGA action).

Employers are also fighting back in innovative ways. In November 2018, a California organization comprised of local business owners, the California Business and Industrial Alliance, filed a lawsuit in Orange County Superior Court against the California attorney general -- California Business & Industrial Alliance v. Becerra. Though the court dismissed the group's separation of powers and due process arguments, the case proceeds with a trial setting conference on Jan. 17, 2020.

Employers have also fought to make their voices heard in Sacramento. Though many of the attempts to reform PAGA have been unsuccessful, reform remains possible and employers should not lose hope. For instance, employers should continue to try and expand the timing and the right to cure PAGA violations before a plaintiff can proceed with a PAGA claim. Currently, only very few PAGA violations provide employers the opportunity to cure and there is only a short, 33-day window from the date of notice to cure. If the alleged violation is not cured within the 33-day period, the employee may commence a civil action. In addition to expanding the opportunity to cure, Courts should be given more guidance with regard to the standard for review of settlement amounts and attorney fees. There should also be more rigorous requirements to proceed with a PAGA claim. Even though PAGA acts like a class action, a PAGA claim is exempt from the usual class certification requirements that apply to class claims. It would be appropriate to impose similar class action rules to PAGA claims. The amount of PAGA penalties should be capped, so the threat of stacking penalties is eliminated.

Arguably, the most effective way an employer can fight the PAGA battle is with compliance. Given the endless changes in employment law, prudent employers should work with employment counsel to regularly audit employment records, practices and policies that may give rise to violations. Reviewing potential issues in an employer's policies and practices such as classification of employees, timekeeping, meal and rest breaks, wage statements, pay periods, timing of pay, regular rate of pay calculations, premium pay, alternative workweek schedules, seventh-day-of rest, etc., could ultimately save an employer faced with a PAGA action. 