Recent job reports show California’s unemployment rate is holding at 4.4 percent, and while that may be a record low for the state, it continues to remain higher than both the national average and many of our neighbors to the east.
Historically, California is known for its creative thinking and innovative spirit, but recently it seems as though every day creates a new hurdle for our entrepreneurs to overcome.
I understand this struggle firsthand, as I have seen one of these companies get built.
Timely Industries opened in 1971 and over the past 48 years it has grown to employ nearly 200 individuals.
Now I won’t say the experience of being president of a business is an easy endeavor, but the risk is worth the reward. Always in existence was a mutual level of respect between management and employees, which is why I couldn’t believe the news informing me a former employee filed a lawsuit under the Private Attorneys General Act (PAGA).
PAGA was signed into law back in 2004 as an outlet for aggrieved employees to take action against labor violations, but over the past 14 years, it has transformed into thousands of frivolous lawsuits that do very little to actually help employees, while causing many businesses to permanently close their doors.
My offense? Providing flexibility for employees to choose their lunch break, rather than forcing strict adherence to California’s five-hour law.
And my story is not unique. I used my frustration from dealing with this PAGA lawsuit to fight for reform by starting the California Business and Industrial Alliance. Along the way, I learned many ridiculous stories depicting similar situations as Timely’s.
Holding a job until retirement is not a right, but a privilege. But terminating an employee who thought he was entitled to such job became a major headache for one small San Fernando Valley company when he used his termination as grounds for a lawsuit under PAGA.
The lawsuit claimed this company failed to handle payroll properly. Each of the charges could easily be refuted, but as is the case with most PAGA lawsuits, the company chose to settle the matter to avoid legal costs, choosing to let the money go to their associates, rather than attorneys. This particular company chose to remain anonymous for fear of more lawsuits or being targeted by the state.
The most far-reaching PAGA dealt with meal periods–specifically, a required meal period on the second shift. After working for 10 hours, employees are entitled to a second meal break. Yet none of his employees wanted to take 30 minutes off at 2:00 am, then work another 30 minutes and go home. They all want to finish work quickly and go home.
In California, granting the employees this right isn’t sufficient–the company must have a signed waiver in each employee’s file indicating he understands that they always have a right to take the second lunch break, and it is their decision to continue working, not their supervisors. Alas, the company did not have the proper paperwork in the employees’ files.
After everything was all said and done, technical errors ended up costing this company nearly a half-million dollars. And per usual, the true winners in this case were the state attorneys, not the employees. After reaching the settlement, the attorneys received $65,000 while the employees involved in the case received an average of $500.
It took one long day of a settlement conference with a retired judge to mediate a settlement, and a total of 42 months to wrap the case up. “It is a terrible process that allows any disgruntled employee to punish a legitimate employer with no consequences to a false accuser. There is no requirement to prove anything. The law assumes the accuser has been harmed and is entitled.”
PAGA actively works against the interest of businesses and their employees. For a law that claims to fight for the little guy, it does a lot more to line the pockets of wealthy trial lawyers.