Actions under California’s Private Attorneys General Act (PAGA) have long plagued employers, both large and small, but that all may change this year.
What is PAGA?
PAGA, enacted in 2004, permits a single employee to stand in the shoes of the state’s Attorney General and file suit on behalf of other “aggrieved” employees to recover penalties for California Labor Code violations. The potential recovery against employers can be substantial, with default penalties calculated as $100 “for each aggrieved employee per pay period for the initial violation,” and $200 per aggrieved employer per pay period for “each subsequent violation.” As such, potential PAGA awards commonly reach millions of dollars against small employers, and tens of millions against large employers, just for simple administrative oversights.
In addition to the potential for steep penalties, several California court decisions have expanded the reach of PAGA over the years. In 2009, the California Supreme Court held that employees bringing actions under PAGA need not comply with the strict procedural rules governing class actions. See Arias v. Superior Court, 46 Cal. 4th 969 (2009). Then, in 2014, the California Supreme Court held that employees could not waive their right to bring PAGA claims in court, paving the way for an increase in PAGA litigation. See Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014).
Recently, California courts have provided some limits to the expansion of PAGA. In 2021, the California Court of Appeals provided a potential “manageability” defense for employers. Specifically, in Wesson v. Staples The Office Superstore, LLC, the Court of Appeals held that trial courts have the discretion to strike claims for penalties under PAGA if the claims will be unmanageable due to individualized issues at trial. See 68 Cal. App. 5th 746 (2021).
Is there an end in sight?
However, the fate of PAGA may rest in the hands of California voters this year. In December 2021, California’s Secretary of State approved the distribution of a petition to put an initiative on the 2022 ballot called “the California Fair Pay and Accountability Act.” The California Fair Pay and Accountability Act aims to essentially repeal PAGA, and replace it with an alternative framework for the enforcement of labor laws.