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Agreement reached by employee advocates, legislators on California PAGA reform

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Business Practices | Legal
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California Gov. Gavin Newsom, legislative leadership, and business and labor groups have agreed on reforms to the Private Attorneys General Act (PAGA) which allows employees to file suit against their employers, and on behalf of other employees.

A press release from Newsom’s office says when legislation reflecting the agreement is passed and signed into law, proponents of a PAGA ballot initiative eligible to appear on the November ballot will be withdrawn. A bill hasn’t been introduced yet and the deadline to withdraw ballot measures is June 27.

“We came to the table and hammered out a deal that works for both businesses and workers, and it will bring needed improvements to this system,” Newsom said, in a news release. “This proposal maintains strong protections for workers, provides incentives for businesses to comply with labor laws, and reduces litigation.”

According to the release, the reform proposal would:

    • Cap penalties on employers who quickly take steps to fix policies and practices, and make workers whole, and for employers who proactively comply with the labor code;
    • Create new, higher penalties on employers who act maliciously, fraudulently, or oppressively in violating labor laws;
    • Increases the amount of penalty money that goes to employees from 25% to 35%;
    • Reduce the need for litigation;
    • Protect small businesses by providing a “more robust” right-to-cure process through the Labor and Workforce Development Agency (LWDA) to reduce litigation and costs;
    • Allow courts to limit the scope of claims presented at trial to ensure cases can be managed effectively;
    • Allow courts to provide injunctive relief to compel businesses to implement changes in the workplace to remedy labor law violations;
    • Require that employees have personally experienced the alleged violations brought in a claim; and
    • Give the Department of Industrial Relations (DIR) the ability to expedite hiring and fill vacancies to ensure effective and timely enforcement of employee labor claims.

According to the Los Angeles Times, the court enforcement terms are the purpose of labor-backed Assembly Bill 2288, introduced by Ash Kalra (D-District 25), “which aims to give PAGA more teeth by giving courts the power to order employers to correct violations.”

Andrew Batenhorst, Pacific BMW collision center manager, shared with Repairer Driven News what he learned from a past PAGA lawsuit and his thoughts on the proposed reform.

The first is to make sure corrections on time cards are documented within the business’ payroll system, even for something as simple as the employee forgetting to clock out.

Another lesson Batenhorst learned is to be mindful of employee breaks. In California, employees can’t work more than five hours without a break. If they do, they’re to be paid a meal premium, which is at a higher wage, and that must be documented.

Non-discretionary bonus plans, meaning how bonuses are tied into certain positions, must also be documented and signed by the employee.

“Chances are if one employee had enough reason to want to do this [sue], they are likely going to find all kinds of other issues with your record keeping and [possible] labor law violations when you go through it,” Batenhorst said.

Between litigation and/or fines that could easily add up to a six-figure cost for shops, he added.

The biggest impact the reform would have, in Batenhorst’s opinion, is the addition of a cap on how much a business can be punished and giving businesses a set timeframe to comply, and easing the penalty if they do.

The Fix PAGA Coalition, on behalf of nonprofits, social justice advocates, family farmers, health care providers and businesses, applauded the proposal and provided some additional terms within it:

    • The violations must have occurred within the last year;
    • Employers who proactively take steps to comply with the labor code before receiving a PAGA notice can be awarded a maximum 15% of the applicable penalty amount, and 30% for employers who take action after receiving a notice; and
    • Levels the playing field for employers who pay weekly by ensuring a penalty is adjusted. Presently, such employers are penalized at twice the amount because penalties accrue on a per pay period basis.

A recent report found that since 2013 there have been nearly $10 billion in PAGA court case awards, but due to significant attorney fees, workers have only received a small portion.

“There is near universal consensus that PAGA is broken and not working for workers or employers,” said Brian Maas, California New Car Dealers Association president, in a Fix PAGA Coalition news release. “We need sensible reforms to fix the broken system. We support this legislative reform and encourage lawmakers to swiftly pass the measure…”

Lorena Gonzalez, principal officer of the California Labor Federation, said the law is an essential tool to help workers hold corporations accountable for widespread wage theft, safety violations, and misclassification so the federation is “happy to have negotiated reforms to PAGA that better ensure abusive practices by employers are cured and that workers are made whole quicker.”

Senate President pro-Tempore Mike McGuire (D-District 2) said he’ll be working with Speaker of the Assembly Robert Rivas (D-District 29) to move legislation forward.

Rivas added in Newsom’s press release that the agreement is important because it protects workers and also recognizes companies that follow labor laws.

“[I]t puts more muscle into enforcement,” he said. “I grew up watching farmworkers and employers find common ground, so it means a lot to me that so many groups came together and found consensus. This is a hard-earned agreement, and that makes the positive outcomes we’ll see for businesses and workers even better.”


Featured image credit: utah778/iStock

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