We’ve made no secret of the fact that we’re not big fans of the Private Attorneys General Act (PAGA). Our gripes include the following:

  • PAGA drastically expands the ways that employers can be sued, because employees can sue for violation of statutes that previously provided no private right of action.
  • PAGA expands potential liability for employers, since employees can sue on behalf of themselves and other aggrieved employees.
  • PAGA claims are exempt from arbitration agreements.
  • The procedures that apply to PAGA actions are ill-defined. While a class action plaintiff has to satisfy specific requirements to represent a class, it’s unclear what, if anything, a PAGA plaintiff must show to bring a representative action.

PAGA is based on the pretense that employees are bringing these claims on behalf of the state of California, which lacks the resources to pursue every non-compliant employer. Keep in mind that non-compliant employers, in this context, includes those that don’t put the inclusive dates of the pay period on the wage statement or who put the employer’s address on the paycheck, but not on the attached pay stubs. Pretty heinous stuff, right?

In keeping with this pretense that plaintiffs are acting for the state, 75% of the penalties go to the Labor and Workforce Development Agency (LWDA) and 25% goes to the “aggrieved employees.” That means that, for every dollar an employer pays in PAGA penalties, an employee shares 25¢ with all other aggrieved employees. When it comes time to settle cases, the parties decide what part of the settlement to designate as PAGA penalties and what part goes directly to the employees. Invariably, plaintiffs want more to go to them directly because they and their attorneys get all of that. Employers will go along with that because they get more bang for their buck.

Copyright: lisafx / 123RF Stock Photo
Copyright: lisafx / 123RF Stock Photo

Now, as part of the state’s new budget:

  • The LWDA will take 60 days to review proposed PAGA claims to decide if it wants to bring an action itself (previously 30 days).
  • The plaintiff cannot file the action until 65 days after submitting information to the LWDA (previously 33 days).
  • Any proposed settlement needs to be sent to the LWDA and approved by the Court (previously, you only needed court approval).

The fact that the LWDA will be more active in reviewing proposed PAGA settlements means that more money will need to be earmarked for PAGA penalties. More money going to PAGA penalties, means less going to plaintiffs directly. Since employees see just a fraction of those penalties, it will be more expensive for employers to settle lawsuits that include PAGA claims. You can add that to our ever growing list of reasons why, for employers and their counsel, “PAGA” is a four-letter word.