Pulling Back On The Reins Of The Private Attorneys General Act: New Steps To Curb The Latest Trend In Lawsuits

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Pulling Back On The Reins Of The Private Attorneys General Act:

New Steps To Curb The Latest Trend In Lawsuits

By Kevin Cleveland

California Governor Jerry Brown’s latest budget proposal contains important provisions which would make significant changes to the way litigation is conducted under The Private Attorneys General Act (PAGA).  In recent years, wage and hour litigation has seen an increase in PAGA claims.  PAGA allows “aggrieved” employees to recover civil penalties for California Labor Code violations which previously could only be collected by the Labor and Workforce Development Agency (LWDA).  In effect, PAGA allows current or former employees to enforce labor code violations through lawsuits against employers. If found liable, employers face thousands of dollars in penalties per employee, per pay period, up to one year and 33 days prior to filing their complaint.  As a result, PAGA lawsuits can quickly represent penalties in the millions of dollars for large companies despite what may be relatively minor technical violations.

Luckily for employers, Brown's 2016-2017 state budget proposal seeks to create a “PAGA unit” to review claims and settle them out of court when possible.  This would hopefully reduce the amount of PAGA litigation and also lead to the early settlement or rejection of non-meritorious claims.  However, under the proposal, the PAGA unit can object to PAGA court settlements and all PAGA settlements would have to be approved by the Court which could complicate settlements or prevent settlements which are overly beneficial to employers.

Currently, an employee must send written notice to the employer and the LWDA within one year of the last violation in order to be able to file a PAGA lawsuit and list the specific labor code sections which have been violated.  Brown’s proposal would also require employees to provide greater details in their letters to the LWDA regarding the bases for their claims and to submit a copy of the proposed complaint where 10 or more employees are involved.  This requirement could create an affirmative defense for employers when employees fail to provide sufficient detail.  The proposal would also increase the 33-day period to fix technical pay stub violations which was created with the passage of AB 1506 in October of 2015 to 60 days.  However, perhaps most importantly, the proposal seeks to create an "amnesty and safe harbor program," which would shield employers from PAGA penalties while the employer becomes compliant with recent court decisions.

Counsel to Management:

At this point it is too early to know whether Brown’s proposals will be passed or modified before they are enacted or whether these changes will benefit employers.  Much of the proposal, particularly the safe-harbor provision, the more detailed complaint requirement, and the creation of a PAGA unit, will likely be a benefit to employers.  However, if the PAGA unit is allowed to prevent the settlement of claims, the benefits of the PAGA unit reviewing and assisting in early settlement of claims may be outweighed by increased litigation fees and costs and increased settlement amounts.  For now, unless you know people on the Senate or Assembly budget committees, we will all just have to wait to see if these big changes come into effect or not. In the meantime, if someone files a PAGA lawsuit against your company, or you just want to make sure that your paystubs are compliant, the experienced attorneys at the Saqui Law Group are ready to assist you.

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