A California law that allows individuals to file civil lawsuits against employers to resolve state Labor Code disputes needs to be overhauled this year to end trial-attorney shakedowns of small business and nonprofits, according to a disability services advocate.
Barry Jardini, executive director of the California Disability Services Association, said the state’s Private Attorneys General Act (PAGA), which was enacted in 2004, represents a threat to the community service organizations that make up his association. A November ballot initiative would eliminate the class-action approach to dealing with Labor Code disputes, while state lawmakers are discussing ways to fix the problems with PAGA.
The financial burdens resulting from PAGA lawsuits filed by private attorneys are being widely felt in the disability services industry, according to Jardini.
“It's remarkably prevalent in our membership and, I think, across the disability services space," he told the Southern California Record. “... We did a survey last year and roughly 25% had already been hit by PAGA claims. The truth is that once there is an awareness that an industry is vulnerable to these types of claims, it only prompts and promotes further claims against our service industry.”
Under the provisions of PAGA, employees can hire an attorney to litigate issues such as scheduling of break times, starting times, overtime wages and even language issues on pay stubs. Jardini and many business groups in the state contend the law has been hijacked and manipulated by trial attorneys in a way that provides lawyers tens of thousands of dollars in fees while workers get a small fraction of that amount..
None of the members of the California Disability Services Association has gone out of business as a result of having to pay damages or a settlement resulting from a PAGA lawsuit, he said. But they have had to cut back on programs for the disabled or have seen financial reserves they’ve built up over time evaporate, according to Jardini.
“In our system, in particular the developmental services system, our services are completely state-funded,” he said. “We do get federal matching dollars. … We are effectively taking state resources – state taxpayer dollars – that are intended to serve people with developmental disabilities and paying them out to settle these PAGA claims that are going to benefit attorneys while workers are not really getting a lot of value or proper resolution.”
In a recent opinion article Jardini authored, he said a Southern California nonprofit that is an association member settled a PAGA lawsuit for $335,000, with plaintiffs’ attorneys receiving nearly $200,000 and employees getting less than $100 each.
A recent report prepared by Baker & Welsh LLC concluded that workers would receive three times more than what civil lawsuits provide if their claims were reviewed by a state agency, such as the Division of Labor Standards Enforcement (DLSE). The average PAGA court case nets on average $1,264 per worker, while DLSE claims awards average $3,613 per employee, according to the report.
In addition, PAGA cases filed in the court system take a year longer to resolve than claims filed with the DLSE, the report says. The latter group of claims take less than 10 months to resolve, while the average wait time for PAGA court cases is 23 months, according to the study.
PAGA supporters argue that state labor agencies lack the resources to resolve the number of labor claims filed statewide, but reform advocates say a state PAGA fund now contains more than $250 million – enough to launch a new state enforcement system that would not require private attorneys.