By Tom Manzo
Most Californians view on-demand rideshare platforms such as Uber as a helpful tool to simplify their commute. For the state’s trial attorneys, Uber was just another easy mark.
Last month, the Superior Court of Los Angeles County announced a $7.75 million settlement in a Private Attorneys General Act — better known as PAGA — lawsuit against the company. It was a pyrrhic victory for the attorneys, however; the case documents expose the real beneficiaries of PAGA complaints — and it isn’t the drivers.
PAGA has been making plaintiffs’ attorneys rich since 2004 — at the expense of employees, employers, the state, and just about everyone else. PAGA “deputizes” employees to exact penalties from employers for just about any violation of the California Labor Code, which is over 1,300 pages long, single-spaced, in 10-point font. And it doesn’t matter if an employer intended to violate the law — literally any violation, no matter how technical or innocent — is a PAGA violation.
That single violation gives that employee the right to represent every employee in the state that is said to be “aggrieved” for the same reason, such an inaccurate pay stub.
The penalty for the first offense is $100 per pay period. And the penalty doubles to $200 per pay period in certain circumstances. Penalties accrue per pay period, per employee, for up to a year, unless the employer fixes the problem. Employers generally have no right to “cure” or fix the problem, even if they had no idea they were doing anything wrong.
In Uber’s case, a lawsuit was filed claiming that the Uber drivers were employees, and not the independent contractors that they actually are. This distinction matters because employees in California are guaranteed certain rights, like a minimum wage, meal breaks, rest breaks, and itemized paystubs. The case got nowhere near trial. Instead, after several failed attempts, a California state court approved a $7.75 million settlement of the lawsuit, covering 1.5 million drivers.
A windfall for the drivers? Not so fast. The case document shows that the attorneys took a $2.3 million cut of the settlement, and the state took over $3.6 million. The remaining money was split among the relevant drivers, who took home just $1.08 each — and that’s not a typo. Chalk up one for the little guy!
The California legislature created PAGA because its agencies didn’t have the resources to enforce the 1,300-page Labor Code. So it created a “bounty” for plaintiffs’ and their attorneys to enforce the law for them. Under the statue, 75 percent of the penalties are supposed to go to the state, and 25 percent are supposed to go to the employees. But as the Uber case demonstrates, that’s never how it really goes.
In reality, plaintiffs’ file PAGA lawsuits that allege penalties in the millions or billions of dollars. But these cases rarely, if ever, go to trial. The vast majority are settled for pennies on the alleged dollar — like the Uber case. The California agency responsible for enforcing PAGA estimated that the claim could exceed $1 billion. But the case settled for $7.75 million, or 0.0075 percent of the penalty calculated by the California agency.
I know what you’re thinking: Why would the plaintiffs’ lawyers settle for pennies on the dollar? Because they get to take 30 percent off the top (or more) for their trouble — and that’s not pennies. Just ask the plaintiffs’ attorneys in Uber, who walked away with $2.3 million for putting just over a dollar in the pocket of the average Uber driver.
Maybe you’d take that deal, too. But it’s time the California Legislature put a stop to this scam.
Tom Manzo is President of Timely Industries in Pacoima and founder of the California Business and Industrial Alliance, which promotes the interests of California-owned small and mid-sized businesses and the people they employ.