Private Attorneys General Act in Need of Reform

To identify flaws in the California Private Attorneys General Act (PAGA), reformers need look no further than comments from the state agency assigned to oversee implementation of the law.

Last May, the Labor and Workforce Development Agency (LWDA) highlighted “key insights” in its budget change proposal to the Legislature. The unstated, but inevitable conclusion is no surprise to the business community: PAGA lawsuits have mainly benefitted private attorneys.

Among the key findings from the agency is that “the substantial majority of proposed private court settlements in PAGA cases reviewed by the [PAGA] Unit fell short of protecting the interests of the state and workers.”

What is the “substantial majority”? According to the LWDA, “Seventy-five percent of the 1,546 settlement agreements reviewed by the PAGA Unit in fiscal year 2016/17 and 2017/18 received a grade of fail or marginal pass, reflecting the failure [emphasis added] of many private plaintiffs’ attorney to fully protect the interests of the aggrieved employees and the state.”

So if the substantial majority of aggrieved employees are not benefitting from PAGA lawsuits, and employers are the ones paying thousands—and sometimes millions—of dollars in penalties, who is benefitting?

Trial attorneys.

Cases filed by trial lawyers often are not meritorious. The LWDA budget document describes many of the settlements pushed by private attorneys as “inadvisable and unlawful.” In fact, the frequency of such inadvisable and unlawful settlements is listed as a powerful factor for the PAGA Unit’s decision to be less cautious and increase its involvement in proposed settlement agreements.

Sometimes, supporters of PAGA will point to a handful of high-profile cases to use as examples of PAGA protecting workers’ rights and argue against reform. What is often left out, however, is that the workers receive very little of the claim settlement, while their attorneys make millions. One such example, highlighted in a recent report from labor advocacy groups charactering PAGA as “California’s Hero Labor Law” (CHLL), is the string of lawsuits filed against companies for failing to provide cashiers and bank tellers with seating.

One of the most prominent of those lawsuits was brought against a large retailer, which settled for a headline-grabbing $65 million in 2018. Often ignored is that more than $21 million went straight to the trial attorneys, while the aggrieved workers received a check average of $108—some got even less.

In a PAGA lawsuit against a transportation company in 2018, individual drivers received just $1.08. The attorneys made $2.3 million.

High-profile cases brought against some of the biggest names in the business world make headlines, but less than half of the PAGA notices filed since September 2016 actually resulted in civil complaints, according to the LWDA budget proposal.

“This means many PAGA cases are resolving or disappearing before the complaint is filed in civil court,” the LWDA states.

The agency acknowledged that the issue warrants further investigation given that “one of the concerns expressed about PAGA is that some plaintiffs and attorneys pursue claims (frivolous and otherwise) only to settle quickly for little money.”

Again, none of this will surprise the state’s businesses, which for years have been targeted by predatory trial attorneys and have been faced with higher costs or closing shop. Yet, special interest groups have glossed over the negatives, asserting that PAGA overwhelmingly benefits workers and reforms are not needed because there’s no evidence of real abuse. The CHLL report, for example, makes a number of assumptions about the LWDA budget change proposal that conflict with the agency’s own explanations, pushing the narrative that PAGA’s penalties are necessary to deter violations.

As evidenced by the state government’s own data, PAGA obviously needs reforms; a 75% fail/marginal pass rate for settlement agreements is a clear sign that something is wrong. As it currently stands, PAGA is not protecting workers, the state or employers—it’s just making preying on businesses incredibly profitable for the trial lawyers.