The state agency that processes California employees’ wage theft claims against employers has 47,000 backlogged cases, an insufficient number of employers to do its job and only a 12% collection rate against companies, according to a new state audit.
California’s state auditor, Grant Parks, issued the audit of the Labor Commissioner’s Office (LCO) on May 29. In response, the LCO reported that it agreed with the audit’s recommendations for the office and is already moving to make improvements.
The LMO’s performance is particularly timely this year because voters in November may be deciding whether or not to repeal the Private Attorneys General Act (PAGA), which allows employees to recover penalties for state Labor Code violations through private lawsuits. Repealing that law would place the full burden for resolving wage theft claims on the LCO.
The initiative to repeal PAGA is headed to California’s Nov. 5 ballot unless the Legislature and PAGA opponents – including business groups – come up with a compromise for reforming the current law. Critics say PAGA has generated a steady stream of windfall payouts to trial attorneys and burdensome penalties for small businesses over minor infractions, while creating few benefits for employees.
“According to the LCO’s data, it had 47,000 backlogged claims at the end of fiscal year 2022-23,” Parks said in a letter to the governor and legislative leaders. “Its Wage Claims Adjudications Unit … lacks a sufficient number of staff throughout its field offices and thus can neither process new wage claims in a timely manner nor efficiently reduce the extensive backlog of wage claims.”
Even among those claims that have been investigated, the commissioner’s office has failed to collect judgments from employers 88% of the time, according to the auditor’s report. Claims have been successfully collected from companies in only 12% of cases from 2018 through November 2023, Parks’ analysis says.
“We analyzed the LCO’s staffing and available workload data, and estimated that it needs hundreds of additional positions under its existing process to resolve the backlog,” Parks said. “The lack of adequate staffing is exacerbated by the fact that the LCO currently has a high vacancy rate and an inefficient and lengthy recruitment process.”
The LMO problems and inefficiencies are a growing problem, the auditor’s report states.
“The backlog of claims had grown from 22,000 at the end of fiscal year 2017-18 to 47,000 at the end of fiscal year 2022-23,” the report states. “As of Nov. 1, 2023, more than 2,800 claims had been open for five years or more; these claims equated to more than $63.9 million in unpaid wages.”
Kathy Fairbanks, spokeswoman for the FixPAGA coalition, which includes business associations and community and disability groups, said the LMO should take on increased responsibilities to resolve wage disputes despite the audit’s findings.
“We believe the Labor Commissioner’s Office should have a greater role in resolving employee claims,” Fairbanks said in an email to the Southern California Record. “The Labor Commissioner is fully funded by mandatory payments from employers and has $100 million available right now. We can and should improve the Labor Commissioner’s process by hiring and training more staff.”
PAGA’s “lawsuit-first approach” continues to fail workers and to point up the need for reform, she said.
“Under PAGA, lawyers take the lion’s share of any settlement, leaving workers with pennies on the dollar,” Fairbanks said. “We need to move away from this broken lawsuit-heavy system and create one that provides workers more money and resolves claims faster.“
State Sen. Steve Glazer (D-Contra Costa) called the state audit extremely troubling.
“This lack of enforcement emboldens companies to exploit workers, knowing they can likely escape any real consequences, thus perpetuating and increasing further abuse,” Glazer said in a prepared statement. “These findings paint a grim picture of an agency overwhelmed and ineffective, leaving workers vulnerable and without recourse.”