PAGA protest
The California Business and Industrial Alliance protests California’s Private Attorneys General Act. Courtesy of CABIA

When it comes to the Department of Industrial Relations’ war against so-called “wage thieves,” the call appears to be coming from inside the house. 

It turns out that the DIR — the very agency that is supposed to identify wage thieves in California — has failed to pay its own employees and is now facing a wage theft lawsuit of its own. The lawsuit filed earlier this month alleges that the department failed to pay promised telework stipends to roughly 530 employees and now owes them at least $300,000. 

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The error was likely an oversight on DIR’s behalf. The agency likely never intended to short its employees. It probably got caught up in the state’s confusing 1,100-page labor code and made a good-faith miscalculation as to who should be paid what.

A DIR spokesperson said it had identified cases that “had errors or required clarification” and that the agency was working hard to expedite those payments. 

But why should we feel any empathy toward the DIR?

For years, the DIR has sided with Big Labor and smeared California businesses as “wage thieves” for making the same minor mistakes. The DIR has made no effort to educate employers or to help guide them toward compliance. Instead, enforcement of the labor code was outsourced to trial attorneys under the Private Attorneys General Act

PAGA allows trial attorneys to sue employers on behalf of employees for any perceived violation of the state’s labor code. Instead of having a system in place to coach employers, they are just hit with six-to-seven-figure lawsuits for even the tiniest infraction.

The results have been disastrous. A study done by my organization, the California Business and Industrial Alliance, found that PAGA lawsuits leave workers and employers in a worse position than cases decided by the state. 

The average state-decided case leaves workers with 4.5 times larger awards than PAGA lawsuits. Yet the average PAGA case costs employers hundreds of thousands of dollars more than state-decided cases — approximately $1.1 million per PAGA case.

Where does the missing money go? Trial attorneys. They pocket an average of $372,000 per PAGA case. And the whole process takes one-year longer on average under PAGA. 

The DIR is about to find out just how even the smallest, good-faith mistake can be used as a sword against employers. 

But even with the lawsuit pending, the DIR can’t really understand the pain employers feel when these lawsuits arise. After all, they’ve got a bottomless fund of taxpayer dollars they can use to make this case go away. 

California businesses don’t have that luxury. For struggling businesses, a PAGA notice can be the final nail in the coffin of their life’s work. All it takes is one disgruntled employee and a PAGA attorney to destroy years of hard work. There’s no golden parachute of tax dollars to save them.

The irony of it all is that California’s hardworking business owners that have been hunted by DIR officials over minor mistakes will likely foot the bill for this mess through their tax dollars. For California businesses, there are no victories. 

All California business owners can do is hope that this lawsuit captures the attention of officials at the DIR so they begin to understand just how devastating these policies can be so they can work to change them. 

And maybe it will give DIR officials some time to think about whether smearing businesses as “wage thieves” for minor mistakes is really the way to improve the lives of workers and employers in California. 

Tom Manzo is the president and founder of the California Business and Industrial Alliance.