The Private Attorneys General Act: What Is It?

The Private Attorneys General Act (“PAGA”) allows an aggrieved employee to bring a lawsuit to recover civil penalties against an employer personally or on behalf of other current and former employees for violations of the California Labor Code. Under PAGA, aggrieved employees can virtually sue for any alleged violation of the Labor Code.

An employee suing under PAGA does so as the proxy or agent of the state’s labor enforcement agencies and collects penalties on behalf of the state. In other words, an action under PAGA does not involve the employee/employer relationship. Rather, it is an enforcement action designed to protect the public and not to benefit private parties.

In order to bring a claim under PAGA, an employee must first give written notice to the employer and the Labor Workforce Development Agency (“LWDA”) of the alleged violations of the Labor Code, with the supporting factual basis for the violations. If within 33 days, the LWDA chooses not to issue a citation or fails to issue a citation within 158 days of the employee’s notice, the employee may commence a civil action. If civil penalties are recovered, the LWDA will receive 75 percent and the remaining 25 percent will go to the aggrieved employees.

How Is PAGA Different From A Class Action? A PAGA claim is different from a class action in many respects. Most important to note is that on June 23, 2014, the California Supreme Court held that the right to bring a representative PAGA claim cannot be waived by the terms of an employment contract. See Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014). Thus, while employment contracts may forbid class actions, and require arbitration of individual claims, PAGA provides another avenue for unhappy workers to circumvent this contractual prohibition.

Also, PAGA has no notice requirements to the unnamed aggrieved employees. Unlike class actions, PAGA does not have an opt-out option. In addition, the court does not inquire into the ability of counsel for the plaintiff to fairly and adequately represent unnamed employees, and it has no numerosity, commonality and typicality requirements of a class action.

In addition, the finality of a PAGA judgment is different. In a class action, those class members who did not opt-out are bound by the judgment. In a PAGA claim, all nonparty employees have the right to recover other remedies available under federal and state law – other than civil penalties.

Unlike a regular wage claim, with a three-year statute of limitations, the statute of limitations on a PAGA claim is one year, which typically means that fewer employees would be included in the group.

So What Does This Mean? With class action lawsuits being increasingly the subject of prohibitions in employment contracts, PAGA claims may be on the rise.

PAGA claims make it easier for an employee to bring claims for wage and hour violations on behalf of other nonparty employees, and to seek civil penalties on their behalf without the strict requirements of a class action.

For those provisions of the Labor Code that do not contain a penalty, PAGA’s catch-all provision authorizes aggrieved employees to recover $100 per pay period for an initial violation and $200 per pay period for subsequent violations, and amounts sufficient to recover underpaid wages. Thus, PAGA penalties can add up quickly and, in some circumstances, will exceed the actual damages associated with the violation.

In addition, PAGA authorizes an award of attorneys’ fees and costs to a successful plaintiff.

How Can Employers Minimize Exposure? If faced with a PAGA claim, employers should contact counsel immediately to determine if they are eligible to take advantage of PAGA’s “safe harbor” rule. The safe harbor rule protects employers that choose to abate and cure alleged Labor Code violations prior to the filing of a lawsuit. If an employer discovers that a technical error has been made and takes immediate corrective action, and notifies the LWDA of its action, it may avoid a lawsuit, or at the very least minimize its exposure to penalties.

To further mitigate liability, employers should also review payroll policies to ensure they comply with the complex provisions of the Labor Code. A careful review of meal and rest breaks should be done, ensuring they are taken in accordance with California law. Employers must keep accurate track of employees’ hours and breaks and make sure employees are properly compensated for all hours worked, including unauthorized overtime.

Employers should also carefully review employee classifications, ensuring that exempt employees not only meet the salary test for the exemption (note that the minimum salary amount increased as of July 1, 2014) but that they also meet the other requirements necessary to qualify for the exemption.

For more information about PAGA, contact Rhonda L. Nelson at rln@severson.com.