California state lawmakers are quickly advancing legislation to reform the state's notorious Private Attorney General Act - reforms business advocates hope will curtail some of the worst abuses of the law, dubbed by critics as one of the laws most abused by trial lawyers in the entire U.S.
And in the meantime, as the reform legislation advances, trial lawyers are rushing to court with hundreds of new PAGA lawsuits, appearing to race against the clock to extract a few more paydays before the current window of opportunity narrows.
Gov. Gavin Newsom, the California Chamber of Commerce and the California Labor Federation/AFL-CIO announced earlier this month that the parties had agreed to reform PAGA, a law that allows employees to hire attorneys to file civil lawsuits for even minor violations of state labor statutes.
The reform deal would reportedly avert a potentially embarrassing loss at the ballot box for Newsom and his union and trial lawyer allies later this year under a referendum, introduced by the Fix PAGA Coalition, that would have repealed the PAGA law entirely. According to a survey of California voters, as many as 72% of voters have indicated they could support the ballot measure, if it were to advance to the fall 2024 election.
Under the deal, the Fix PAGA Coalition agreed to withdraw its November ballot initiative if the governor signs substantive reforms into law by June 27, the last day this year under California law that a ballot measure can be withdrawn before advancing to the November election.
As of June 26, two similar bills were advancing through committees in the state Assembly and state Senate, with full bipartisan support, signaling the measures should make it to Newsom's desk by the Thursday deadline.
Business groups have expressed hope that the proposed reforms would lead to workplace improvements and a healthier business climate in California. The reforms would cap penalties on employers that move quickly to resolve employees’ complaints, create higher penalties for companies that repeatedly violate labor regulations and direct a greater share of the penalty proceeds (35%) to affected employees.
The agreement would also allow the state Department of Industrial Relations (DIR) to accelerate hiring and fill employee vacancies in order expedite employees’ labor claims. The goal would be to use state administrative avenues to resolve more employee complaints rather than relying on private lawsuits to resolve disputes, according to the Governor’s Office.
“We support any reform to PAGA, as this has been one of the nation's most abused laws by trial lawyers,” Tom Manzo, president of the Los Angeles-based California Business & Industrial Alliance (CABIA), told the Southern California Record in an email. “Many of the proposed changes need to be evaluated more, and we will need to see how the changes will work in practice.”
PAGA reform has been a years-long process driven by businesses big and small, according to Manzo.
“It started with the grassroots storytelling, creative lawsuits and original research from small business groups like CABIA, and has been amplified by the financial might and lobbying prowess of the state’s larger business groups,” he said.
The problems related to PAGA – the litigation burdens faced by small companies and the continuing contingency-fee payoffs earned by trial lawyers – have not abated in recent years, according to Manzo.
“If you need evidence that the trial lawyers are worried about the gravy train coming to an end, more than 665 PAGA notices were filed last week,” he said.
Jennifer Barrera, president and CEO of the California Chamber of Commerce, expressed thanks to Newsom, Senate President pro Tempore Mark McGuire and Assembly Speaker Robert Rivas for helping to broker the deal.
“This package provides meaningful reforms that ensure workers continue to have a strong vehicle to get labor claims resolved, while also limiting the frivolous litigation that has cost employers billions without benefiting workers,” Barrera said in a prepared statement.
Newsom also expressed confidence that the new reform formula would bring real workforce benefits.
““We came to the table and hammered out a deal that works for both businesses and workers, and it will bring needed improvements to this system,” he said. “This proposal maintains strong protections for workers, provides incentives for businesses to comply with labor laws and reduces litigation.”
Labor force data collected over the past eight to nine years indicates that workers affected by disputes about overtime, break times and other issues were not materially benefiting from PAGA actions, according to the chamber. A report authored by former top California state labor officials for the firm of Baker & Welsh showed PAGA lawsuits have forced California employers to pay more than $10 billion to end PAGA lawsuits since 2013. The chief recipients of those payments have been the California state government, which currently claims three-fourths of all PAGA penalties paid, and the lawyers who file the lawsuits, who have raked in big money in fees.
Lorena Gonzalez, the principal officer of the California Labor Federation, said the reforms would help workers who are victimized by abusive employer practices.
“PAGA is an essential tool to help workers hold corporations accountable for widespread wage theft, safety violations and misclassification,” Gonzalez said.