Employers with operations both large and small in California are all too familiar with California’s Private Attorneys General Act (“PAGA”), the controversial 2004 statute that permits a single employee to stand in the shoes of the state’s attorney general and file suit on behalf of other employees to seek to recover penalties for alleged Labor Code violations.
PAGA lawsuits are filed with great regularity by members of the plaintiffs’ bar.
And the in terrorem effect of PAGA lawsuits, in which a plaintiff need not satisfy class certification criteria to represent an entire workforce, has led many employers to pay large settlements just to avoid legal fees and the possibility of larger awards -- even when the evidence of unlawful conduct is spotty or entirely absent.
Will 2024 be the year that PAGA is repealed?
And perhaps not.
It appears the fate of the much-maligned statute will be left in the hands of California voters.
Unlike other states, California provides a process by which its own voters can determine whether to put new laws in place.
In 2024, California voters will determine themselves whether to repeal PAGA and replace it with a new law called the Fair Pay and Employer Accountability Act – which the California Secretary of State has confirmed received a sufficient number of signatures to appear on the ballot.
If enacted by voters, the Fair Pay and Employer Accountability Act would provide a streamlined process to address employees’ claims – and larger potential recoveries for the employees themselves in the event they are treated unlawfully. Among other things, employees would receive 100% of any recovery under the proposed statute, rather than just 25% as they receive under PAGA.
Who would be largely cut out of the process? The plaintiffs’ bar, which has benefited more than anyone from PAGA — and which is likely to fight the ballot initiative aggressively.
When PAGA first went into effect back in 2004, it was commonly referred to as “the Bounty Hunter law.” That’s what employment lawyers called it. That’s what the press called it.
Over time, lawyers and the media began to refer to it instead by its acronym – “PAGA” – not because the original nickname was inaccurate, but out of convenience, if nothing else.
As history has proved, however, the original “Bounty Hunter” sobriquet was an accurate one. Some plaintiffs’ firms have filed hundreds of nearly identical PAGA lawsuits against employers across the state, accusing them in the same vague terms of not paying their California employees for all time worked, not providing compliant meal and rest periods, and not providing accurate wage statements. Often these lawsuits are filed with little, if any, effort to determine pre-filing if any violations actually occurred, much less systemically.
With the threat of potentially huge penalties driving large, early settlements from many employers, PAGA has proved to be a cash cow for the plaintiffs’ bar – but not so much for the employees they purportedly represent in these cases.
In the typical PAGA settlement, plaintiff’s counsel negotiate up to 40% of the total settlement amount for themselves, often for doing little more than filing a boilerplate complaint and attending an early mediation. The remaining 60% of the settlement is divided between the state Labor and Workforce Development Agency (“LWDA”) (which receives 75% under PAGA) and the purportedly aggrieved employees (25%).
In other words, the typical PAGA settlement is apportioned as follows:
- 40% – plaintiff’s counsel
- 45% – LWDA
- 15% – employees
For illustrative purposes, assume a PAGA action involving 5,000 employees settles at the outset of the case for $1,000,000. Here is how the settlement would typically be divided:
- $400,000 – plaintiff’s counsel
- $450,000 – LWDA
- $150,000 – employees
The attorneys would receive up to $400,000 for filing suit and attending a mediation while each of the 5,000 employees would receive $30 – a miniscule percentage of the attorneys’ recovery.
The Fair Pay and Employer Accountability Act is designed to correct that imbalance, while exposing employers to more damages if they willfully violate the law.
While the appeal of the Fair Pay and Employer Accountability Act to voters would seem clear, it appears the initiative may have a very difficult path to being passed by voters.
The plaintiffs’ bar is likely to campaign heavily against the initiative, attempting to convince voters that the larger potential recoveries for employees are somehow not in the employees’ best interests. And the plaintiffs’ bar has plenty of money in its coffers from all of those PAGA settlements to use to fight efforts to repeal PAGA.