(CN) — The California Private Attorney General Act, which allows employees to step into the state's shoes to enforce the labor code against their employers, will get an overhaul under an agreement between legislative, labor and business leaders.
The deal announced Tuesday will preempt a ballot initiative that was to be voted on in November to replace PAGA with an employer-backed law that would leave it to the state rather than trial lawyers to bring enforcement actions.
“We came to the table and hammered out a deal that works for both businesses and workers, and it will bring needed improvements to this system," California Governor Gavin Newsom said in a statement. "This proposal maintains strong protections for workers, provides incentives for businesses to comply with labor laws and reduces litigation."
The act has long been a source of frustration for businesses in California who say they face frivolous claims by their aggrieved employees for mere technical violations of the labor code. Each year, thousands of PAGA claims are filed, putting employers on the hook for penalties that are split between the state and the employees suing.
Employees, on the other hand, argue that PAGA is a crucial tool to ensure that businesses abide by the law and pay their workers what they are owed, because it's impossible for the state to go after every violation of the labor code.
In 2022, the U.S. Supreme Court sided with the employers in ruling that employees can be forced to arbitrate their individual PAGA claims. However, last year, the California Supreme Court said that individual employees can nevertheless litigate these claims in court as representative of other employees of the same business.
The changes negotiated between representatives of the California Chamber of Commerce, the California Labor Federation, AFL-CIO, and leaders of the California legislature include a cap on penalties for employers who quickly take steps to fix challenged practices and higher penalties for employers who fraudulently violate labor laws.
The changes, which will need to be approved by California lawmakers, also ensure that 35% of the recovered penalties goes to the employees instead of the current 25%.
In addition, the agreement expands which labor code sections can be cured to reduce the need for litigation, protects small employers by providing a more robust right to cure process to reduce litigation and gives court more authority to limit the scope of claims to ensure cases can be managed effectively.
“We are happy to have negotiated reforms to PAGA that better ensure abusive practices by employers are cured and that workers are made whole, quicker,” said Lorena Gonzalez, principal officer of the California Labor Federation, AFL-CIO. “PAGA is an essential tool to help workers hold corporations accountable for widespread wage theft, safety violations, and misclassification."
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