California Employment Law: Navigating the Debate Over PAGA

In recent years, the rise in claims under the Private Attorneys General Act (PAGA) has stirred considerable dialogue among employers. This growing dialogue has culminated in the placement of a ballot initiative in this upcoming November election that would repeal PAGA if passed. This is notable not only for its immediate impact on the state’s legal and business landscapes, but also for the broader implications it may hold for the future of California employment law.

PAGA, enacted by the California state Legislature in 2003, empowers employees to file lawsuits against their employers for alleged violations of state labor laws, provided they first notify the state and the state opts not to investigate. This legislation has been a leading mechanism for enforcing labor laws in California since its passage, yet its growing use has raised questions about its effects on businesses.

According to a recent study by the law firm Ogletree Deakins, PAGA claims surged by 34.5% from 2022 to 2023, hitting a record 7,826 notices last year. The rise in PAGA filings can be attributed to various factors, including a series of decisions by the Supreme Court of California that have favored employee plaintiffs, thereby encouraging more claims against employers. These legal precedents have opened new avenues for employees to challenge perceived injustices, contributing to the uptick in litigation. Perhaps most significantly, PAGA has served as a pathway for a single employee to force change on behalf of a class of employees, where such class lawsuits would otherwise have likely been barred by the existence of arbitration agreements that are common for employees to sign when they take a job.

Business groups have expressed concern that the current framework allows for excessive damages awards that disproportionately benefit private attorneys at the expense of the employees harmed by labor law violations. This critique points to a crucial debate within California employment law: balancing the need for robust labor protections with the realities of legal practice and business operations.

Amid these developments, an initiative branded the “Fair Play and Employer Accountability Act” has been added to the ballot in California for this upcoming November election. This ballot measure, aims to repeal PAGA, modify the role of the state Division of Labor Standards Enforcement in labor-law complaints, and require that monetary penalties are awarded directly to employees and not attorneys.

Proponents, including the California New Car Dealers Association Issues PAC, Western Growers Service Corp, and California Business PAC argue that such reforms could alleviate the burden of PAGA litigation on employers while enhancing the direct benefits to employees. Opponents of the bill argue that the initiative would eliminate protections for employees and guard corporations against enforcement of labor laws by making it impractical for employees to pursue actions against employers who violate California labor laws.

As the discussion around PAGA and its implications for California employment law continues to evolve, it is essential for employers, employees, and legal professionals to stay informed and engaged. As a California employment mediator, remaining neutral in the debate over the law is a requirement, and understanding the arguments for and against it can be helpful in gaining even greater perspective of the feelings held by both parties in the many PAGA mediations that I come across.

Over the next 8 months leading up to the election, as stakeholders from various sectors weigh in, the future of PAGA and its role in the state’s legal framework are at stake, with potential implications for both businesses and employees.

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