The Impact of Recent PAGA Compromises
The Private Attorneys General Act (PAGA), a pivotal piece of California labor law, has recently undergone significant reforms that have sparked a mixed response among legal professionals.
These changes, signed into law by Governor Gavin Newsom in June 2024, aim to address long-standing concerns from both employers and employees regarding the 20-year-old legislation.
However, the compromises have left the legal community divided, with opinions varying widely on the potential outcomes of these adjustments.
Understanding PAGA: A Brief Overview
First enacted in 2004, PAGA was designed to empower employees to file civil lawsuits for labor code violations when the state attorney general declined to pursue such cases. This law was particularly important in a fast-growing labor market, where the California Labor and Workforce Development Agency often struggled to keep up with the volume of complaints.
Under PAGA, employees could act as private attorneys general, bringing forward claims on behalf of themselves and others. Successful cases typically resulted in penalties split between the state and the affected employees.
The Recent Reforms: What Has Changed?
The recent legislative changes to PAGA introduce several key modifications intended to balance the scales between employee rights and employer protections.
These reforms include:
- Penalty Structure Adjustments: The new law imposes a lower cap on penalties for employers who proactively cure violations after receiving notice. Conversely, it raises penalties for employers found to have acted maliciously or fraudulently.
- Increased Employee Payouts: Employees now receive 35% of the penalties awarded, up from 25%.
- Expanded Cure Provisions: Employers now have broader opportunities to remedy violations before a lawsuit proceeds, with courts given more discretion to allow these remedies.
- Stricter Plaintiff Criteria: The reforms require plaintiffs to have personally experienced the alleged violation, limit the scope of who can join a PAGA action, and give judges more control over case management.
These changes have been met with mixed reactions from the legal community due to the reforms' complexities and potential unintended consequences.
Marcus Bradley’s Perspective: A Pandora’s Box of Litigation
“This is not a win for plaintiffs or employees.”
Marcus Bradley, co-founder of the
Westlake Village-based firm Bradley Grombacher LLP, has expressed significant concerns regarding the recent PAGA reforms.
In a recent interview, Bradley described the changes as opening a "Pandora’s box" of potential new legal challenges. He anticipates that the reforms will lead to a surge in litigation focused on whether employers have genuinely cured violations and adequately compensated their employees.
"What it’s going to do is spark a lot of litigation over whether [employers] have fully cured violations and made their employees whole," said Bradley.
For attorneys like Bradley, who have long represented plaintiffs in wage-and-hour class actions, these changes may introduce new complexities that could deter employees from pursuing valid claims and reduce the willingness of attorneys to take on such cases.
The Employer’s Defense: A Welcome Relief
On the other side of the debate, defense attorneys representing employers have largely welcomed the PAGA reforms.
Kevin Sullivan, a member of Epstein Becker & Green P.C. in Century City, views the changes as a positive step toward reducing frivolous lawsuits and providing clearer guidelines for resolving legitimate claims.
"Any sort of curtailment on what has been going on for nearly 20 years with PAGA is a step in the right direction," Sullivan remarked. He believes that the new cure provisions and stricter criteria for plaintiffs will lead to more precise and substantiated claims, allowing employers to address genuine issues more effectively.
Supporting this perspective, Jennifer Barrera, president and chief executive of CalChamber, described the reforms as "monumental."
In a statement, she highlighted the significance of Governor Newsom's approval of the bills, noting that the new policies reflect a successful conclusion to extensive negotiations between the business community, labor, and legislative leaders.
“Governor Newsom’s signature on these two bills represents a successful conclusion to months of hard work and compromise among all parties. The business community, labor, and legislative leadership worked together to establish meaningful change that will curtail rampant PAGA lawsuit abuse while offering better outcomes for employees who have been wronged. The new policies coming out of the reform measures signed today will create more fairness in the process for small businesses and, importantly, incentivize them to understand and comply with labor laws that impact their workforce to the benefit of all.”
Do The Broader Implications Require a Shift in Legal Strategies?
As the legal landscape around PAGA evolves, both plaintiff and defense attorneys will likely adjust their strategies in response to the new rules. For plaintiff’s attorneys, the increased scrutiny and potential for prolonged litigation may lead to more selective case intake, focusing on more substantial, clearer-cut claims.
Meanwhile, defense attorneys may engage in more extensive investigations and negotiations early in the process, aiming to resolve issues before they escalate to costly trials.
Sullivan notes that the reforms could encourage earlier dispute resolution, potentially reducing the overall burden on the court system and allowing for quicker remedies for affected employees.
However, Bradley counters that the reforms might ultimately increase legal costs for employers, as defense attorneys may raise their fees in response to the more intricate legal landscape.
“There’s a reason why defense attorneys are running around hiring attorneys… While the penalties will be lower, the employers will be paying their attorneys more,” claims Bradley.
A Compromise With Uncertain Outcomes
The recent PAGA reforms represent a significant shift in California’s approach to labor law enforcement.
While the changes were designed to strike a balance between protecting employee rights and reducing employers' burdens, the true impact of these reforms will only become apparent as new cases are filed and litigated under the updated regulations.
The debate over PAGA's future is far from settled, and legal professionals on both sides will watch closely as the first cases under the new rules unfold. For now, the compromise represents a new chapter in the ongoing saga of California’s labor law, which will undoubtedly continue to evolve in the years to come.
Read Zane Hill's original article, PAGA Compromise Gets Divided Response, for more insights and opinions on the recent PAGA reforms.
