The Lawsuit Against the PAGA Law Moves Ahead

Tom Manzo
Founder of the California Business and Industrial Alliance

On June 6, 2019, the California Business and Industrial Alliance appeared in Orange County Superior Court to defend its Due Process and Excessive Fines challenges to the Private Attorneys General Act (“PAGA”).  The hearing was a follow-on to the March 28, 2019 hearing where the Court (1) rejected the State’s attempt to dismiss CABIA’s Equal Protection challenge, (2) granted CABIA “leave to amend” (i.e., re-write and add facts) its Separation of Powers challenge, and (3) asked the parties to answer questions the Court had about the Due Process and Excessive Fines challenges.

Following oral argument, the Court granted CABIA leave to amend its Procedural Due Process Challenge, but not its Substantive Due Process or Equal Protection Challenge.  While we were disappointed that we couldn’t move forward on the latter two challenges, the Court granting leave to amend the Procedural Due Process challenge was a huge win. This is an important component of CABIA’s overall litigation strategy, because it is the claim through which CABIA will put the entire PAGA framework “on trial” and through which CABIA will expose the unconstitutional “no win” scenario that PAGA creates for the typical California employer-defendant.

Under this scenario, an employer must defend a lawsuit that threatens millions of dollars in penalties without any regard to whether the employer did anything wrong, knew it was doing anything wrong, or has the ability to pay the fines. The law requires the employer to pay the plaintiff’s attorneys’ fees, all without any notice or ability to predict what the actual penalties will be until the Court exercises its discretion to lessen the penalties to the absolute maximum the constitution will allow under the facts.  Alternatively, the employer can pay an extortionate settlement to the plaintiffs’ attorney who is exercising substantial state power without any state oversight.

On July 12, CABIA will file its amended complaint explaining how this paradigm discourages all but the world’s largest and richest employers from even trying to defend themselves in Court, which is a violation of their procedural due process rights, as well as how the delegation executive power to private citizens violates California’s separation of powers doctrine.

CABIA has live claims that will entitle it to take discovery and that will likely have to be resolved at trial, which means that CABIA will get the chance to publicly and aggressively litigate the many failings of the law. One of the live claims is California Legislature’s decision to exempt a small subsection of employers (i.e., construction industry employers with collective bargaining agreements) that violated the equal protection rights of California employers. There is no denying that CABIA faces an unprecedented battle that will not end at the trial court.  Because a win there likely means an appeal by the State to the Court of Appeal, and a win there would almost certainly trigger another appeal to the California Supreme Court. By then, CABIA’s arguments and evidence should be well distilled and extremely convincing. If needed, CABIA plans to take this fight to the Supreme Court. That win would relieve California employers from the onerous and extortionate effect of PAGA in this State.

 

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