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The battle brewing over California workers’ unique right to sue their bosses

By Suhauna Hussain, Los Angeles Times
Published: March 4, 2024, 6:00am

California workers who believe they have been victims of wage theft or other workplace abuses have for more than two decades relied on a unique state law that lets them sue employers not only themselves but also for other workers.

Now a battle is shaping up over the law, known as the Private Attorneys General Act, or PAGA. An initiative seeking to replace PAGA will appear on the ballot in California in November, the culmination of long-standing efforts by corporate and industry groups to undo the law.

Two reports released last week offer dueling narratives about whether PAGA helps or hurts workers — marking the opening of a potentially expensive fight over the landmark law that relatively few know about.

Labor researchers say that the ballot measure, if approved, would harm employees, particularly people with low-wage jobs, by taking away their ability to file what are essentially class-action suits against employers that allege labor law violations. The ballot measure also would weaken the state’s already strained system for enforcing workplace laws, the researchers say.

But the business coalition backing the ballot initiative, called the Fair Play and Employer Accountability Act, counters that the labor law has resulted in a proliferation of lawsuits that small businesses and nonprofits have little ability to fight. Workers end up getting less money after a long legal process than if they had filed complaints through state agencies, the initiative’s proponents say.

Worker advocates have long complained that chronic understaffing at state agencies responsible for investigating employee complaints means that allegations about wage theft and other violations can take years to be resolved. So workers turn to the courts.

Luz Perez Bautista and her mother, Maria de la Luz Bautista-Perez, were among three named plaintiffs who sued Juul Labs Inc. in federal court in 2020 for allegedly misclassifying some 450 campaign staffers working on a ballot measure the company was promoting to allow the sale of electronic cigarettes in San Francisco. The workers were all classified as independent contractors rather than employees, which saddled them with expenses that employees wouldn’t have to pay.

Workers were made to travel long distances between campaign offices without pay, were not given lunch breaks and were terminated abruptly, Perez Bautista said, speaking at a news conference last week to unveil a report by the UCLA Labor Center as well as researchers at advocacy groups PowerSwitch Action, and the Center for Popular Democracy.

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Because the workers had signed arbitration agreements, without PAGA they would not have had the legal standing to take Juul and the nonprofit it created for the campaign to court. Through their PAGA claim workers secured a $1.75-million settlement.

“It is important for other workers to see that … you can hold your boss accountable,” Bautista-Perez said at the news conference.

The report argues broadly that eliminating workers’ ability to pursue private lawsuits would leave them more vulnerable to having their wages stolen by employers and other abuses of their rights.

PAGA plays a “vital role” in bringing bad actors into compliance, said Tia Koonse, legal and policy research manager at the UCLA Labor Center.

Koonse and other authors of the report said the ballot initiative is disingenuously framed as a push to reform PAGA and bolster other enforcement mechanisms.

“By cloaking policies that hurt workers in language that says they’re helping workers, corporations are making it sound like what is down is up,” said Minsu Longiaru, senior staff attorney for PowerSwitch Action.

Other mechanisms to enforce California labor laws are insufficient on their own, including wage claims and whistleblower complaints investigated by state agencies, the report argues, because the sheer number of labor violations dwarfs the state’s capacity to enforce them.

Each year, the $40 million recovered in approximately 30,000 wage claims filed with the state labor commissioner represents roughly 2% of the estimated $2 billion California workers lose to wage theft, according to the report.

An analysis of California Labor & Workforce Development Agency data by the report’s authors found that 91% of PAGA claims allege wage theft, primarily overtime violations and failure to pay for all hours worked, although some involved violations of earned sick leave rights. Other forms of wage theft include paying workers less than minimum wage, denying workers meal breaks or rest periods and requiring employees to finish tasks before or after their shifts.

The initiative at the center of discussion, the Fair Play and Employer Accountability Act, got the green light to be placed on the November 2024 ballot almost two years ago.

It proposes to remove the law’s powerful private right of action, which empowers workers to file lawsuits against their employers, suing for both back wages and civil penalties on behalf of themselves, other employees and the state of California. Official language for the measure states it would eliminate “employees’ ability to file lawsuits for monetary penalties for state labor law violations.”

Backers stress it also offers replacement provisions that would bolster state agency enforcement of workplace rules.

Replacement provisions include doubling penalties for employers “willfully” violating labor law, requiring 100% of monetary penalties to be awarded to harmed employees (rather than the current division of 25% to the employee and 75% to the state of California), and requiring that the state provide employers with resources to help with coming into compliance.

“Today’s PAGA system is completely broken and does not work well for employees or employers,” said Jennifer Barrera, president and chief executive of the California Chamber of Commerce, in announcing a report released last week by backers of the ballot initiative, called the Fix PAGA coalition.

Barrera said that because one employee can sue on behalf of others, it allows lawyers to stack charges and extract high penalties from employers with few barriers because PAGA claims don’t require the same type of notification and certification of workers allegedly affected that a class-action suit would require.

“The statutory framework of PAGA is what creates the abuse,” she said in an interview.

Barry Jardini, executive director of the California Disability Services Assn., said that members of the trade group, many of which are nonprofits reliant on state or federal funding, are increasingly burdened by PAGA claims. He said 20 out of some 85 members who responded to a recent survey said they dealt with PAGA claims in 2023.

Jardini said that disability service businesses have struggled to provide true “responsibility-free” 10-minute rest breaks in accordance with labor laws because often workers “can’t just walk away” from clients especially if they are out and about instead of at home. He said employers have looked for creative solutions, such as paying employees extra for working through breaks or tacking on breaks at the beginnings or ends of shifts rather than the middle, but these fixes aren’t legal substitutes for rest breaks workers are entitled to.

“We run into a bit of a legal rock and a hard place,” he said. “We do have a conflict with the law in terms of some of our services. Once that becomes known, it’s relatively easy for an attorney to try to solicit a client that works in this industry that is maybe ripe for PAGA claims.”

The claims sap resources and lead to program closures because “providers with very thin margins are using up their reserves on settling these claims,” Jardini said. “Other times providers are unable to give wage increases to their staff. And at the end of the day it impacts people with disabilities.”

Some disagree that there is rampant of abuse of PAGA. The UCLA Labor Center researchers published a report in February 2020 finding no evidence that PAGA unleashed a flood of frivolous litigation, as its detractors complain, and that it had demonstrably enhanced Labor Code compliance among employers.

In response to criticisms outlined by the recent UCLA Labor Center report, Kathy Fairbanks, a spokesperson for the coalition, pointed to findings in the coalition’s report, which argues that PAGA is too slow to resolve claims, leaves workers with little compensation, and enriches lawyers while saddling businesses with costly suits.

Fairbanks said that workers get about one-third of the compensation and that PAGA cases take twice as long compared with cases adjudicated by state agencies. That is because “lawyers take massive fees and are getting rich while workers get very little,” Fairbanks said.

Lorena Gonzalez, head of the powerful California Labor Federation agreed that PAGA is at times abused by “unscrupulous attorneys,” but said repealing the law is not a solution.

“There’s massive wage theft that goes unaccounted for, and to take away this tool from the tool box would be damaging to workers and a gift for corporate America,” said Gonzalez who formerly served as a state assembly member known for authoring labor-friendly legislation.

If approved by voters, the ballot measure “would leave workers with dwindling opportunities to enforce labor law.”

Gonzalez said it is well understood that state labor agencies are subject to short staffing and ebbs and flows of political desire to take on major cases. Although it’s not ideal to have to rely on private attorneys to help enforce the law, PAGA provides an important avenue for enforcement, she said.

The initiative doesn’t concretely mandate or otherwise clear the way for increased funding for enforcement agencies, Gonzalez said.

To suggest the business lobby, through the ballot initiative, is asking for changes that will actually improve labor law enforcement “doesn’t pass the smell test,” she said.

Backers of the ballot initiative are open to working on a legislative compromise to avert a costly battle, spokesperson Fairbanks said. But any sort of deal would have to be reached before the end of June — the deadline to pull measures off the November ballot. The Fix PAGA coalition reports having banked some $15 million in campaign contributions so far.

Business groups have sought to shrink PAGA’s reach in state and federal courts with limited success in recent years.

In June 2022, the U.S. Supreme Court, considering the California case Viking River Cruises Inc. vs. Moriana, ruled that PAGA violated the rights of employers and that the claims of other employees would have to be dismissed because the employee sent to arbitration would no longer have standing to pursue that litigation.

But in a concurring opinion it also affirmed that interpretation of PAGA was a matter of state, not federal, law and in effect kicked the matter back to California.

State appellate courts consistently have held that PAGA claims by workers cannot be forced into arbitration, since they are brought as if the individual is operating on the state’s behalf.

In July 2023, the California Supreme Court rejected an argument by Uber that sought to limit the ability of its drivers to take employment-related disputes to court, unanimously determining that a driver could not sign away the right to represent their peers in a lawsuit.

The decision didn’t end the debate, however, with other cases bouncing around the courts.

A federal appeals court on Feb. 12, citing the Uber case, ruled that a PAGA suit against Lowe’s Home Centers for allegedly underpaying workers who took sick leave could stand.

Judge William Fletcher wrote in the ruling that a state court “has the authority to correct a misinterpretation of that state’s law by a federal court,” including the U.S. Supreme Court.