Friday, April 19, 2013

The Impact of the Private Attorneys General Act on Employment Claims

In 2004 California enacted the Private Attorneys General Act (PAGA).  (Cal. Labor Code sections 2698 - 2699.5.)  The law allows persons to sue on behalf of the Labor and Workforce Development Agency (Agency) for violations of the Labor Code.  The person suing is entitled to seek the penalties the Agency could seek if it had filed the action.  If the person prevails (s)he keeps 25 percent of the penalties while the Agency takes 75 percent.  Attorneys' fees are also available under PAGA. 

There was a rash of lawsuits when the law was first enacted.  Employers found it was less expensive to settle these lawsuits as opposed to fighting them, even if the merits of the lawsuits were questionable.  The lawsuits were so prevalent that PAGA was amended to require a potential plaintiff to notify his/her employer of the alleged wrongful act or behavior.  If the employer "cured" within a month, then the plaintiff is unable to move forward with a lawsuit. 

PAGA appears to be in fashion again.  Over the past few years courts have made class action wage and hour cases more difficult for plaintiffs to win.  (Frankly, that's a good thing.  It seems those cases are designed more for the pocketbook of the lawyer than for the recovery of the wronged employee.)  With the difficulty presented in class action lawsuits, plaintiffs' lawyers have returned to PAGA. 

Take, for example, the employee who has not been properly paid his/her overtime compensation.  The employee can sue on his/her own and on behalf of other aggrieved employees.  In addition to the unpaid wages, the employee can seek penalties under PAGA.  The default penalties under PAGA are $100 for the first offense, $200 for subsequent offenses.  In this case, penalties rack up with each pay period.  Multiply the number of aggrieved employees by the number of payroll periods (26 pay periods in my example) and you can arrive at a very healthy penalty.  If you had 25 aggrieved employees the penalty would be ($100 x 25 employees) + ($200 x 25 pay periods x 25 employees) = $127,500.  Ouch. 

Employers should audit and monitor pay practices.  They should determine whether employees who are exempt are performing exempt-level work.  These preventative practices take effort, time and some money.  However, it can save an employer hundreds of thousands of dollars in damages, penalties and attorneys' fees in the event of an employee's successful lawsuit.  I tell clients, "You can pay me now or pay me later and it is always more later."  That really is true.  Spend a few dollars on compliance to avoid big bucks on litigation.  Of course, if you don't, I'm still ok with that.  You will pay me more to defend your case. 

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