2024 will see the Private Attorneys General Act (PAGA) face a decisive vote. With the November 2024 ballot looming, the proposed California Fair Pay and Employer Accountability Act could potentially replace PAGA, dramatically altering California's employment landscape.
Enacted in 2004, PAGA gives “aggrieved employees” the authority to file representative lawsuits that address specific Labor Code violations. This legislative response was intended to strengthen labor law enforcement by alleviating the strain on California's Labor and Workforce Development Agency (LWDA).
For the past 20 years, PAGA has functioned as follows:
First, employees file a PAGA claim online with the LWDA, incurring a $75 filing fee that can be waived. This filing, which is served on the employer via certified mail, includes essential details but does not require every fact.
The LWDA then has 65 days to decide whether to pursue the case. If the LWDA declines to pursue the case, the employee can proceed with their own PAGA lawsuit, acting as a representative for others who experienced labor violations.
If a PAGA litigant is successful, 75% of any penalties go to the LWDA, with the remaining 25% going to the employees, along with an award of reasonable attorneys' fees.
In recent years, PAGA has been the subject of considerable scrutiny, particularly in the context of arbitration agreements, with major court decisions such as Viking River Cruises v. Moriana (2022) and Adolph v. Uber Technologies, Inc. (2023). While the U.S. Supreme Court in Viking River upheld the enforceability of arbitration agreements that prohibit PAGA claims, the California Supreme Court in Adolph took a different approach, allowing non-individual PAGA claims to proceed after arbitration. These conflicting decisions have created confusion for employers, as employers may still be sued under PAGA despite the existence of a valid arbitration agreement.
Additionally, as PAGA plaintiffs are not required to meet class certification standards to represent an entire workforce, California employers are often forced to settle for large sums of money simply to avoid legal fees and the possibility of larger awards. This has occurred even in cases with little or no evidence of unlawful conduct and has caused numerous employers to suffer major financial losses.
It is important to note that criticism of PAGA is not limited to employers. Many California employees have also expressed concerns that PAGA primarily benefits attorneys at the expense of employees, as attorneys often receive a large portion of the settlement, leaving little for the employees.
In response to these criticisms, the California Fair Pay and Employer Accountability Act has been placed on the November 2024 ballot to repeal and replace PAGA. The proposed changes brought on by the Act will include shifting the filing process to the LWDA, granting it exclusive authority for Labor Code enforcement, and increasing penalties for violations. Additionally, employees would receive 100% of recovered penalties, eliminating the current 25% allocation. The Act will also eliminate attorneys' fees entirely, introduce penalty-doubling authority, and establish a Consultation and Publication Unit for employer guidance.
As California approaches a critical election in November 2024, the fate of PAGA and potential reform through the California Fair Pay and Employer Accountability Act are uncertain. Employers and employees alike must stay informed about these developments. As 2024 progresses, we will be sure to provide updates on this critical employment reform.