If you own or operate a business in California you most likely already know we have one of the highest workers compensations rates in the nation, highest tax rates, health insurance rates, and recently named number one for the most litigious state. At a certain point you would think our legislators would be embarrassed by such numbers.
Recently I saw an article published in Law 360 and it pointed out that California accounts for 12% of the total US population and more than 50% of all class actions in the US. There are more than 3,200 new federal cases filed a year in California with even more class actions filed in State Court. I would say California shattered the Class Action Lawsuit ranking and has another number one in the nation trophy to mount on their wall.
With the court system already being too jammed up, this opens the door for more cases to be settled in mediation. The Private Attorney General Act (PAGA) appears they have about 98% mediation rate as most never go to court due to the expense. PAGA is known as the sue your boss law and has been gaining more and more momentum year after year as the trial attorneys are realizing huge payouts for themselves while business owners, their employees, and the state are helpless in mediation and also become victims to this cruel law. PAGA was written into law in 2004 to protect employees for the underground economy so bad employers would not take advantage of them. The state at the time had a deficit and felt it was a good idea to allow trial attorneys to enforce labor law violators. ‘Ovem lupo commitere’ , Latin for (‘To set a wolf to guard sheep.’)
More than 35,000 PAGA Lawsuits have been filed since 2004 and the cases are shocking to comprehend based on the so called labor violations. If you have a flexible schedule and decide to eat your lunch 1 second past 5 hours, that is a violation. If you give an employee a gift card or bonus for a job well done, that is a violation if not calculated properly, off by a penny or two, it could coat you millions.
What is really taking place is trial attorneys are seeking out terminated employees and offering them money they are owed from their previous employer. This ex-employee can represent all of their fellow employees in a class action lawsuit. With the PAGA provision it makes it easy to send a notice to the employer, investigate, while looking for any violation, and then file suit against the employer.
Here is an example of how skewed this law is. If the employer shorted the employee $ 28.61 on alleged labor law violations civil penalties and personal damages would be $69,508.61. That is 2,430 times the alleged actual damages and I bet you would get a better rate form a loan shark. If the employer has 30 employees the exposure is over $ 2,000,000 and actual damages would be only $ 858.30 to the aggrieved employees. So the trial attorney goes to mediation with the threat of more than $ 2,000,000 and tells the employer you need to settle this as legal expenses to fight could be another million. The trial attorneys know based on their deal with the state they will get 100% of their fees paid, as it comes right off the top of the settlement, usually a third of the total. The balance is then negotiated and what is supposed to happen rarely does, meaning the state takes 75% of the balance and the employees get the remaining 25%. When the balance is settled everything becomes a shroud of secrecy and all of the employers do not want to talk about this as they are afraid they will get hit again.
The state is so overwhelmed with PAGA cases they can’t keep track, and the disgruntled employee who gets a check for $ 15.00 is told by the attorney who is being paid to protect them that you were only owed $ 28.61, so you did alright. The employer thinks after they settled for $ 750,000 that it was way better than 2 million. The trial attorney gets $ 250,000 and tells all of their colleagues how much they are helping the employees who have been taken advantage of.
That is the reality of PAGA and if anyone tells you different they are probably a trial attorney. California is being a leader in too many categories and Class action Lawsuits is nothing to be proud of. Furthermore we are the only state with such a law as PAGA and it is only allowing trial attorneys to steal from not only businesses, they are stealing form non-profits as well. Plaintiff Magazine has an article on settling class action lawsuits and how to divvy up the money on PAGA to the LWDA, “Most attorneys are allocating only a small amount to PAGA claims in their settlements”. Recently one attorney stated in an article,” PAGA is not for the employees.”
Our legislators need to focus on business and the negative effects of passing too many complex laws. Alan Dershowitz is quoted, “The defendant wants to hide the truth because he’s generally guilty. The defense attorneys job is to make sure the jury does not arrive at that that truth.” The PAGA Trial Lawyers know they are guilty of taking advantage of a broken law and it is their job to keep you way from that truth.