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The California Labor Code Private Attorneys General Act (PAGA) authorizes aggrieved employees to file lawsuits, including class actions, to recover civil penalties on behalf of themselves, other employees, and the State of California for Labor Code violations. Those who intend to pursue PAGA cases must follow the requirements specified in Labor Code Sections 2698 – 2699.5. According to the California Legislative Analyst’s Office, approximately 5,000 PAGA notices are filed annually. Any penalties won under PAGA must be split between the employees (25%) and the state of California (75%).

A proposed ballot measure, the “Fair Pay and Employer Accountability Act,” if passed, will repeal PAGA and replace it with increased enforcement mechanisms in the hands of the Labor and Workforce Development Agency. The initiative at the center of the brewing major political battle, the Fair Play and Employer Accountability Act, got the green light to be placed on the November 2024 ballot almost two years ago.

If passed, the Labor and Workforce Development Agency will enforce labor code violations, focusing on encouraging voluntary compliance over punitive measure and ensure that 100% of the penalties go to workers. Notably, the proposed ballot measure would double potential penalties that could be levied, however, it would remove the threat of an award of attorneys’ fees. In exchange, PAGA – as it exists today, will be repealed. The proposal signifies a landmark development, aiming to maintain employee rights while potentially alleviating the burden of PAGA claims on businesses.

The initiative has received endorsements from the California Chamber of Commerce, Western Growers Association, California New Car Dealers Association, the California Restaurant Association and a long list of organizations.

The California Chamber of Commerce said, “The California Fair Pay and Employer Accountability Act is an opportunity to reform labor law enforcement to prevent frivolous litigation while ensuring that workers receive the wages they are owed in a timely manner, plus any penalties.”

The battle in November heats up as two reports released last week offer dueling narratives about whether PAGA helps or hurts workers – marking the opening of a potentially expensive fight over the landmark law.

On February 15, the UCLA Labor Center, PowerSwitch Action, and the Center for Popular Democracy released a new report, the first examining the impact of a ballot initiative on workers’ ability to fight workplace abuses, and what the authors claim are the theft of billions in wages from their paychecks and violations of sick leave and workplace safety rules. Labor researchers say that the ballot measure, if approved, would harm employees, particularly people with low-wage jobs, by taking away their ability to file what are essentially class-action suits against employers that allege labor law violations. The ballot measure also would weaken the state’s already strained system for enforcing workplace laws.

Corporations are aiming to buy themselves a ‘get out of jail free card’ for labor abuses,” said Minsu Longiaru, Senior Staff Attorney for PowerSwitch Action. “California must stand up for PAGA and send a clear message to big companies that stealing from people’s paychecks has consequences.”

But the business coalition backing the ballot initiative counters that the labor law has resulted in a proliferation of lawsuits that small businesses and nonprofits have little ability to fight. Workers end up getting less money after a long legal process than if they had filed complaints through state agencies. Backers stress it also offers replacement provisions that would bolster state agency enforcement of workplace rules.

Today’s PAGA system is completely broken and does not work well for employees or employers,” said Jennifer Barrera, president and chief executive of the California Chamber of Commerce, in announcing a report released last week by backers of the ballot initiative, called the Fix PAGA coalition.

Barrera said that because one employee can sue on behalf of others, it allows lawyers to stack charges and extract high penalties from employers with few barriers because PAGA claims don’t require the same type of notification and certification of workers allegedly affected that a class-action suit would require.

Barry Jardini, executive director of the California Disability Services Assn., said that members of the trade group, many of which are nonprofits reliant on state or federal funding, are increasingly burdened by PAGA claims. He said 20 out of some 85 members who responded to a recent survey said they dealt with PAGA claims in 2023.

Jardini said that disability service businesses have struggled to provide true “responsibility-free” 10-minute rest breaks in accordance with labor laws because often workers “can’t just walk away” from clients especially if they are out and about instead of at home. He said employers have looked for creative solutions, such as paying employees extra for working through breaks or tacking on breaks at the beginnings or ends of shifts rather than the middle, but these fixes aren’t legal substitutes for rest breaks workers are entitled to.

We run into a bit of a legal rock and a hard place,” he said. “We do have a conflict with the law in terms of some of our services. Once that becomes known, it’s relatively easy for an attorney to try to solicit a client that works in this industry that is maybe ripe for PAGA claims.”

Some disagree that there is rampant of abuse of PAGA. The UCLA Labor Center researchers published a report in February 2020 finding no evidence that PAGA unleashed a flood of frivolous litigation, as its detractors complain, and that it had demonstrably enhanced Labor Code compliance among employers.