The Golden State struck gold this year when Governor Newsom and state legislators agreed on June 18, to reform the Private Attorneys General Act (PAGA). The agreement, signed into law on July 1, marked a significant step towards justice for our state’s small business community. As the President and CEO of the California Hispanic Chambers of Commerce, I’ve unfortunately experienced the devastation caused by predatory lawyers’ misuse of PAGA and this legislative reform is not just necessary; it’s long overdue. However, we must also recognize the need for ongoing wariness and further reforms to safeguard our businesses from exploitation.
PAGA, enacted in 2004, was initially designed with good intentions to empower employees to file lawsuits for labor code violations on behalf of themselves and other employees. The law aimed to supplement the state’s enforcement capabilities, holding employers accountable for labor violations and ensuring workers’ rights were accurately protected. Unfortunately, over the years, PAGA has shifted from its intended purpose and has become a tool for crooked attorneys to exploit small businesses for their own financial gain and career enhancements.
Under PAGA, any employee can sue their employer for labor code violations, no matter how minor, without the need to go through the Labor and Workforce Development Agency (LWDA) first. The standards of PAGA have created a fruitful environment for lawyers to file lawsuits over minute violations. The opacity of labor laws in California further heighten the situation, making it nearly impossible for small businesses to abide by all the intricate labor codes. Even the most diligent employers can fall victim to predatory PAGA lawsuits due to unintentional and minor infractions.
And although many infractions may be minor, the financial burden of these lawsuits on small businesses can be monumental. The threat of a costly legal battle forces many business owners into settlements, even when they believe they have done nothing wrong. The settlement amounts and attorney fees can impair a small business, leading to layoffs, reduced hours, and, in some cases, complete closures. The irony is that the very employees PAGA is supposed to protect end up suffering the consequences when they lose their job due to closures.
That’s why reforming PAGA is essential to restore balance and fairness to our business community. The recent agreement to introduce reforms is a needed relief. Fundamental changes include expanding on the labor code violations that can be remedied. This change alone will significantly reduce the number of frivolous lawsuits by protecting businesses from predatory practices.
Furthermore, the reforms are aiming to establish clearer guidelines for PAGA lawsuits, ensuring that only genuine and significant violations are taken seriously. This will help curb the abuse of the system and redirect aid toward enforcing severe and legitimate labor violations. Additionally, introducing a cap on attorney fees in PAGA cases will discourage lawyers from pursuing cases solely for financial gain, shifting the focus back to the protection of workers’ rights.
While these reforms are a step in the right direction, more is needed. Ongoing reform is necessary to ensure that PAGA continues to serve its original purpose without damaging the small business community.
The California Hispanic Chambers of Commerce is ready to work with lawmakers, business leaders, and labor advocates to execute additional reforms. We aim to create a fair and just system where workers are protected, and businesses can thrive without the constant fear of opportunistic lawsuits. We need a balanced approach that ensures obedience to labor laws while defending businesses from being unfairly targeted.
The recent PAGA reforms in observance represent a notable victory for California’s small business owners. However, continuous efforts to reform PAGA are required to ensure the law remains a tool for justice and not a weapon of exploitation.
