The PAGA Gold Rush

Tom Manzo
Founder of the California Business and Industrial Alliance

The labor union-backed authors of a new report scoff at potential abuses of the state’s Private Attorneys General Act (PAGA), but hundreds of trial lawyers have pursued this modern-day gold rush. One of the state’s top PAGA lawyers even drives a Rolls Royce with the license plate MR. PAGA.

PAGA empowers them to use the power of the state to threaten massive penalties over arcane violations of the state’s 1,100-page labor code. More often than not, employers settle rather than risk financial ruin–netting a quick buck for all the Mr. and Mrs. PAGAs who make up California’s trial bar.  

The report’s authors picked a series of unusual metrics to measure PAGA’s success, such as the state’s cut of PAGA financial penalties nearly tripling between 2018 and 2019.  Let’s be clear: Employer law-breaking did not triple between 2018 and 2019; rather, these increased penalties are a function of the flood of new PAGA notices being filed by trial lawyers. The growing dollar figure attached to PAGA is proof-positive that the law needs closer scrutiny by the state legislature. 

Another unusual metric: The report’s authors point to management-side attorneys’ warnings about the crushing financial implications of PAGA as more evidence of the law’s success. This statement from one firm — “employers should be preemptive in aggressively attempting to identify potential bases for claims against them of nonmonetary California Labor Code violations” — is offered as an example.   

Yet this is precisely the problem with PAGA; it allows trial attorneys to threaten crushing financial penalties for the smallest of labor law violations, even if no financial harm was suffered. The report’s authors use ominous terms such as “wage theft” to suggest that PAGA is saving countless employees from having their paychecks stolen; but that term “wage theft” covers so many arcane labor law issues that it’s often a far cry from the serious issue the term suggests.  

Of course attorneys will warn clients about PAGA; it’s the same as a lifeguard warning that a shark was recently spotted offshore.     

My organization, the California Business & Industrial Alliance, has collected thousands of data points on our website documenting the magnitude of PAGA abuse. In a sense, we view this defensive new report as a mark of our success, because we’ve raised a number of questions about who’s getting rich from the law. With our counsel at Epstein Becker Green, we’ve sued the state over the law; we currently have a live claim, and the court has agreed with us that discovery should proceed against the architect of the state’s PAGA carveout for the union construction industry. 

(This raises an interesting question: If PAGA is so great, why did the state’s lawmakers see fit to exempt unionized construction businesses?)   

Lawmakers interested in understanding the abuses of PAGA should first speak to the employers who are victims of the law–not the interest groups who cherry-pick data to paint a false picture of the law’s impacts. 

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