Shakedown Lawsuits IT’S NOT A MATTER OF IF YOUR COMPANY WILL BE SUED
By Jason Resnick, Senior Vice President and General Counsel The Private Attorneys General Act of 2003 (PAGA) was enacted into law to address the California Labor and Workforce Development Agency’s (LWDA) inability to keep pace with its obligations to enforce the California Labor Code because of budget cuts, inadequate staffing and a rapidly expanding workforce. Traditionally contained solely within the purview of the Attorney General and Labor Commissioner, PAGA outsourced Labor Code enforcement and deputized private plaintiffs to sue their employers for alleged labor law violations. Since then, PAGA, aka the “Bounty Hunter Law,” has become a favored mechanism by plaintiffs’ attorneys to file several thousand shakedown lawsuits a year against businesses large and small.
PAGA authorizes current and former employees to sue their employers on behalf of the state for Labor Code violations allegedly committed against the employee and other aggrieved coworkers. They can then recover civil penalties created by PAGA— including penalties not otherwise obtainable directly through a private right of action. PAGA allows employees to seek a penalty—$200 per pay period per violation—for each Labor Code violation that occurred, not just for Labor Code violations that carry a specified penalty under state law. Moreover, the law creates additional penalties for labor law violations where no penalty currently is provided in state law—$100 per pay period for the first violation and $200 for additional violations. Under PAGA, 75 percent of any penalties recovered is paid to the Labor and Workforce Development Agency, with the plaintiff retaining 25 percent. Prevailing employees are also entitled to attorneys’ fees and costs, which make these claims
disputes. But PAGA claims have been deemed by the courts to be exempted from agreements to arbitrate employee claims, and PAGA actions waivers are deemed by the courts to be void. In other unfavorable rulings, courts have held that PAGA plaintiffs are not required to meet the class certification requirements to peruse a representative claim on behalf of other aggrieved employees; and penalties available under PAGA can be stacked with equally steep statutory penalties under the Labor Code; among others. PAGA complaints coming to workplace near you Under PAGA, because penalties can be stacked, even minor violations can give rise to million-dollar settlements. Most employers are forced to settle PAGA allegations well before trial rather than face the uncertainty and uncapped costs of litigation. The agricultural industry has not escaped the notice of enterprising plaintiffs’ attorneys seeking fertile
particularly lucrative for plaintiffs’ attorneys. Practitioners seek and obtain multimillion-dollar settlements, frequently for purely technical violations predicated on PAGA exposure. If it seems as if the deck is stacked against good, law-abiding employers, that’s because it is. State courts interpreting PAGA have consistently stymied the business community’s efforts to defend against a statute that was seemingly designed to include a cheat code favoring plaintiffs. For example, unlike non-PAGA claims, the California Supreme Court has ruled that arbitration provisions requiring waiver of an employee’s right to bring a PAGA representative action are invalid. Arbitration provides a much faster, and typically more cost effective, forum in which to resolve
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JANUARY | FEBRUARY 2022
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