California is one of the most expensive states for businesses to operate in–in large part due to lawsuit abuses that unfairly target businesses–earning the state the unflattering distinction of being the worst “judicial hellhole” in the nation. Making this even worse is the fact that the targets of these frivolous lawsuits are often the 3 million California small businesses that make up the backbone of our economy.
The breeding ground for these lawsuit abuses is created via the Private Attorney General Act (PAGA). Under PAGA, employers are being sued minor for frivolous items such as typos on a paycheck or not having a beginning and ending date on a pay check stub. Hard working employees ultimately bear the cost of these lawsuits.
While well-intended, PAGA has led to thousands of questionable lawsuits against employers both large and small. Trial lawyers pursuing expensive lawsuits are forcing many businesses to close down or move out of the state. According to the non-partisan Legislative Analyst’s Office, over 6,000 PAGA notices are filed every year and PAGA lawsuits increased by more than 400% from 2005 to 2013.
PAGA is devastating businesses here in Kern County and across the Central Valley. More than 100 businesses across different sectors including oil, agriculture, transportation, and construction have been hit with lawsuits. Many of the lawsuits are being filed by the same lawyers and law firms based outside of the county. In one case, a small business that awarded its employees for conducting their jobs safely was sued under PAGA for damages worth $14.5 million. Rather than drain resources on fighting the meritless lawsuit, the small businesses decided to settle for $1.5 million. Unfortunately for its employees, the company ended its safety bonuses for their employees.
Abusive PAGA lawsuits have no scope and can cost the employer millions of dollars over the smallest details of running a business. Most large businesses are able to foot the bill to fight or settle these lawsuits, but small mom-and-pop businesses are often forced to decide whether to fight the abusive lawsuits or shut down their business.
To help protect employees and businesses, common sense PAGA reform is needed. The current process is too easily hijacked by trial lawyers seeking to line their own pockets. A balanced solution to this issue must enable businesses to grow and thrive while still providing ample protections for employees. I have introduced legislation to significantly improve PAGA, which include common sense reforms, such as capping PAGA penalties, limiting the types of labor code violations subject to PAGA, and giving the state a greater say on which cases may proceed in court.
Action is needed to protect the greatest resource this state has: the hard working individuals who call California home, while also protecting the businesses that contribute to our economy. These reforms will discourage baseless lawsuits created by trial lawyers, and ensure that legitimate claims are resolved in a fair and efficient manner to both the employee and employer.