By Tom Manzo
In October 2003, then Gov. Gray Davis signed into law law Senate Bill 796, the Private Attorney General Act, or PAGA. But I’m not sure the governor — or anyone else — really knew what the outcome would be.
In the first seven months of PAGA, 65 cases were filed and the first nine suits sought $336 million in penalties. Amgen was sued over technical violations totaling $170 million dollars in the opening months.
To put this in perspective, last year close to 8,000 PAGA lawsuits were filed, so the value of claims could easily hit the billions of dollars. Let’s not forget this has been going on for 15 years.
The law was created because the state did not employ enough attorneys to keep up with the growing labor population and there was a budget crisis at the time. If the state could not enforce labor law violations why not allow the trial lawyers? If you have ever heard the phrase “making a deal with the devil,” this one could be the dictionary example.
Now it’s 2018, and California has an $8.8 billion dollar budget surplus. The state no longer needs private attorneys to enforce labor law violations.
The main alleged reason the law was enacted was due to a budget crisis. Today there is not one, so the only reason there would not be a change is the trial lawyers and their lobbying efforts in Sacramento.
Senate Bill 796, which created PAGA was introduced by Sen. Joe Dunn, a trial attorney who later sued the State Bar of California. Dunn was executive director when he was fired for alleged excessive international trips and expenses. He then filed a whistleblower lawsuit and, as karma would have it, lost in arbitration.
I am not even sure if the unions understood his bill even though they supported it. PAGA lawsuits have been filed against unions like the Teamsters and the United Farm Workers, costing the latter millions of dollars. When passing such complicated bills, lawmakers need to spend more time analyzing them, and this should be done in a bi-partisan way with real common ground.
The real question is who has been supporting bills like this and why. As business owners and entrepreneurs build their businesses and do what they do best, legislators are continuing to pass more and more complex labor laws that most do not understand. Late lunches, misclassified incentives, incorrect employee ID numbers, or simply dropping a hyphen on a paycheck can cost an employer millions.
Consider the late lunch violation; anything past five hours from your start time could cost millions, although if you were in a union and had a collective bargaining agreement, the five-hour rule might not apply. Take some of our prison guards as an example. They can work 12 without lunch or break, but if a small company did the same it would be three major violations.
The only winners in PAGA are the trial lawyers. Google recently paid a million dollars, while employees received $15 each and the lawyers over $330,000. Uber drivers received $1.08 each and the lawyers walked away with $2.3 million.
Victims of PAGA are not just businesses either; think of nonprofits like the Salvation Army, San Diego Humane Society, Children’s Homes, and the list goes on. Real reform is needed when it comes to labor laws in California. We continue to hear about the low unemployment rate, fourth largest economy, and so on.
Just talk to someone who has paid out a PAGA lawsuit and ask them how wonderful everything is. One famous quote to consider is, “Pride before the fall.”