The California Private Attorney Generals Act (PAGA), which lets individuals mount civil cases against employers for a wide variety of perceived employment law violations, is likely to get a major overhaul. That has the trucking industry and other employers cheering.
“This is the first major reform to PAGA since its enactment in 2004, so it is a big deal,” Chris Shimoda, the senior vice president of government affairs at the California Trucking Association (CTA), said in an email to FreightWaves.
Shimoda summed up the issue that California business has had with PAGA: “It’s long been a problem for California’s entire business community, including trucking,” he said. “While originally being sold as a means to enhance labor law compliance to the benefit of workers, PAGA had turned into an avenue that primarily benefited plaintiffs’ attorneys who got rich suing companies over minor violations such as clerical errors on paystubs while workers saw pennies on the dollar.”
The agreement among California Gov. Gavin Newsom and both houses of the State Legislature, announced last week, has the backing of the California Labor Federation, which is headed by former Assemblywoman Lorena Gonzalez, who was the primary driver of the state’s AB5 independent contractor law. It also is supported by the California Chamber of Commerce, which took the lead in negotiations on behalf of the business community.
The legislation calling for the overhaul is AB 2288 in the Assembly and SB 92 in the Senate.
“We came to the table and hammered out a deal that works for both businesses and workers, and it will bring needed improvements to this system,” Newsom said in a prepared statement.
A wide range of changes
The proposed law has a range of caps on how much employers must pay for violations and how much employees filing a PAGA action can collect.
But those caps only kick in if the company can show it took “all reasonable steps” to correct the violation. As a blog post from the law firm of Barnes and Thornburgh said, “all reasonable steps may include but are not limited to conducting an audit and taking action in response to the results of the audit, having lawful written policies, training supervisors on applicable labor code and wage order compliance, or taking appropriate corrective action with regard to supervisors.”
Given that an employee did not need to have actually suffered from a violation under existing PAGA law, the CTA’s Shimoda said litigation often became a “‘throw it against the wall and see what sticks’ sort of exercise for the plaintiff’s attorney.”
An initiative slated to be on the California ballot in November would, if approved, result in many of the changes in the proposed PAGA legislation.Passage of the legislation, which would need to happen quickly given various deadlines, would negate the need for that referendum.
Jennifer Barrera, CEO and president of the California Chamber of Commerce, which was the key business community negotiator on the PAGA overhaul, said in a video podcast that the looming vote in November “created an environment where groups from opposite ends of this issue have had an opportunity to sit down and find common ground on things that we can do to improve progress.” The goal would be to allow workers “to get resolution on their labor claims, but not creating this abusive lawsuit and litigation environment for employers.”
No single one of the many changes proposed in the legislation is being touted as more important than others; numerous labor law attorneys have written blogs and commentaries on the changes, and all have highlighted several significant shifts in the proposed law.
A different definition of “standing”
One that comes up frequently, however, is that the person bringing a PAGA action must have more “skin in the game” than in the past. A blog posting by attorneys Andrew Paley and Phillip J. Ebsworth of Seyfarth Shaw noted that the proposed legislation “brings PAGA back to a more traditional approach to standing. Now plaintiffs must prove that they experienced the same Labor Code violations they seek to pursue on behalf of other employees.” Previously, a PAGA action was permitted for a worker who witnessed what he or she thought was a violation of labor law, even if the employee who witnessed the alleged violation did not suffer harm from it.
Christopher McNatt, a California-based partner with the trucking-focused Scopelitis law firm, said these provisions that would slow what he referred to as a “serial plaintiff” in PAGA cases, were significant for trucking.
The serial plaintiffs are those who “jump from carrier to carrier” and “make PAGA claims everywhere.”
A driver who works for a carrier even for a week can bring a PAGA claim, McNatt said, even if they weren’t impacted by the action at the core of the complaint.
“What they do is they work with a lawyer and every time they have a short stint at a carrier, they then become eligible to make a PAGA claim,” McNatt said. With the changes in the rule under the proposed legislation, he added, “there is a stronger likelihood that an individual jumping from carrier to carrier will not have the legs or the support to make a broad PAGA claim at each company he jumps to.”
The proposed changes include a one-year statute of limitations. The Seyfarth Shaw attorneys said that as result of a related federal court decision, “plaintiffs began to argue that there was no time limit on when they could have experienced a Labor Code violation,” which essentially meant there wasn’t a statute of limitations.
Further, according to the Polsinelli Law Firm in its own post on the proposed legislation, “penalties for potential violations will be capped for employers who quickly rectify policies and practices and make workers whole after receiving a PAGA notice.”
The term used is whether a violation can be “cured.” Several attorneys in blog posts said the ability to “cure” a violation before an employer is hit with significant penalties is far greater under the proposed PAGA regime than under the existing structure. “This encourages employers to take prompt and responsible actions to comply with labor laws, before a lawsuit is initiated and before the attorney fees for employees’ attorneys are triggered,” the Polsinelli blog posting said.
Several legal commenters noted that the revised PAGA system would be better for “manageability.” As Polsinelli writes, “courts will be equipped by statute to strike PAGA claims that are unmanageable due to size or scope.”
The relevant wording on that issue, according to Seyfarth Shaw, is that a court “may limit the evidence to be presented at trial or otherwise limit the scope of any claim filed pursuant to this part to ensure that the claim can be effectively tried.”
In a commentary in the National Law Journal by several attorneys of the law firm Ogletree Deakins, they noted that the proposed law would eliminate “stacked penalties” for some violations. (Among the firm’s attorneys is Robert Roginson, who has been the lead attorney in the CTA’s legal battle against AB5.)
A blog post by attorneys Benjamin Ebbink and Lonnie Giamela of Fisher Phillips did not use the term “stacking” but said provisions in the proposed law curb “attempts in PAGA litigation to double-dip or combine the number of penalties that are sought in litigation.”
Small errors in a pay stub mean big problems
Barrera, of the California Chamber of Commerce, was interviewed on the podcast by the chamber’s associate general counsel of labor and employment, Matthew Roberts. He gave as an example of runaway PAGA litigation a case in which an employee’s pay stub did not contain the second four digits of a ZIP code but did have the main five-digit number. “They were sued under PAGA, and this is a case that went all the way through to the appellate system,” Roberts said. While the employer ultimately prevailed, the case did provide “litigation headaches,” he added.
When California’s independent contractor law, AB5, went into effect in trucking after years of litigation, there had been speculation that its use as a tool against perceived misclassification of drivers would come through PAGA actions. But Shimoda said he does not know of any such occurrences.
Shimoda issued a statement of caution regarding the proposed overhaul.
“It remains to be seen how these reforms will work on real world claims and litigation, but they should tamp down some of the worst excesses by PAGA attorneys,” he said.
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