If we want the Golden State to shine once more, fixing this problem is the highest priority.
In a state full of harmful laws, one law has been more destructive than most: The Private Attorneys General Act . Businesses were cautiously optimistic in the fall of 2023 when Governor Newsom signed a package of PAGA reforms described as a “big win” for employers.
But with a full-year of data now available to review, it’s clear that “PAGA Reform” needs more reforming. PAGA, enacted in 2003, allows workers to sue employers over minor labor code infractions, like a misdated paystub, and imposes penalties of hundreds of dollars per violation, per pay period, multiplied across all affected employees. These PAGA penalties add up quickly, with typical cases easily racking up five-, six-, and seven-figure potential consequences. Only a fraction of that money makes its way to workers; the lion’s share goes to the state of California and to the PAGA plaintiffs attorneys who profit off the system. Several years ago, my organization commissioned a study on employee outcomes under this system. The results were less than impressive: Under PAGA court cases, workers were taking home less money, and employers were paying more–all as a consequence of a broken system that incentivizes abusive lawsuits. These findings were followed by a larger business community advocacy campaign to “Fix PAGA.” The resulting deal, among other items, capped PAGA penalties on good-faith employers and bumped up workers’ share of the penalties up from 25% to 35% . But reform was also notable for what it didn’t touch: The incentive structure for PAGA attorneys to bring these claims and maximize their payouts. The majority of PAGA lawsuits are handled in mediation, where there are no guardrails or state oversight, and tremendous pressure to settle and reduce costs. As a consequence, the rapid growth of PAGA lawsuit notices has shown no signs of slowing. According to CABIA’s analysis of state data, PAGA notices have largelysteady at nearly 10,000 notices in the year before and after the reform was implemented, hovering near all-time highs. The advent of AI may have super-charged filings,To determine whether these cases are less-onerous for employers, we analyzed settlement filings that are now available from the state’s Department of Industrial Relations. We used June 19th, 2024–the effective data of PAGA reform–to create a natural experiment, comparing cases filed and settled post-reform with a sample of cases filed pre-reform and subsequently settled. The results are a mixed bag. Aggrieved employees saw the median payout from gross settlements inch up from $1,451 to $1,576. These figures include payouts from both the PAGA penalty and class action awards. However, the median settlement amount in the post-reform sample surged to $400,000, up from $309,000 pre-reform–a 30% hike. It’s possible this outcome is a result of the modest sample size: We are analyzing additional settlement data to determine if this trend holds up. But in our initial sample, workers appear to be only marginally better off, while some businesses are paying more than before. Until we target the incentive structure for filing PAGA lawsuits, and create guardrails on the outcomes that occur in mediation, the PAGA problems will continue to proliferate.Who was really to blame for the government shutdown? What would that look like? For starters, the state needs to do its job. One state analysis found that California reviews less than one percent of filed PAGA notices, letting thousands of these allegations proceed to the “wild west” of mediation. Unlike other PAGA-type lawsuits the state isn’t involved in these mediations, so it has no visibility on the outcomes. Just two fixes–state review of all PAGA notices before they can proceed, and state involvement in all PAGA mediations–would go a long way towards fixing the status quo. Accomplishing these tasks is not a question of resources, but of will: The state’s Labor Department has nearly 12,000 employees and a $14.7 billion annual budget. Over a year into the implementation, it is clear that PAGA needs more reforming. PAGA notices continue to be filed at a rapid clip, sucking capital from small business owners who could otherwise be investing in their people and their communities. If we want the Golden State to shine once more, fixing this problem is the highest priority.‘Really upsetting’: UCLA football fans react to possible Rose Bowl exodusThese are 10 must-try bakeries in the Los Angeles area LA, OC evacuation orders and warnings canceled after storm brings mudslides, toppled trees and floodingAn effort to recall LA Councilmember Imelda Padilla is underway
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