California Fair Pay and Employer Accountability Act May Provide a Glimmer of Hope for California Employers

For small and midsize California businesses, the cost to defend against an employee’s suit under the Private Attorneys General Act (“PAGA”) can easily threaten the viability of the business! This is because the underlying predicate violations of the California Labor Code giving rise to PAGA penalties are extremely favorable to the employee, thus exposing the employer to significant liability for widespread violations of the Labor Code. However, a glimmer of hope for employers may be on the horizon!

Sadly, most California employers are all too familiar with PAGA claims. PAGA allows an “aggrieved employee” to bring a “representative action” against their employer on behalf of themselves and other similarly situated employees for civil penalties resulting from the employer’s violation of the California Labor Code. As part of this legislative scheme, 25% of the penalties assessed go to the employees, and the remaining 75% goes to the State of California

PAGA was initially intended to provide an easy mechanism for the State of California to enforce the Labor Code without expending significant resources. Instead, PAGA has become a bonanza for disgruntled employees and Plaintiff’s attorneys seeking to penalize employers. What is more, Plaintiff’s attorneys are highly motivated to bring these claims against employers because they may recover the fees and costs associated with the claim.

Plaintiffs may bring a PAGA claim for almost any underlying violation of the Labor Code by the employer. This includes meal and rest break violations, failure to properly pay overtime wages, and the failure to provide accurate itemized wage statements. Thus, even the most conscientious and detail-oriented employer risks liability under PAGA.

Recently, the California Chamber of Commerce and several other business organizations proposed the California Fair Pay and Employer Accountability Act (“CFPEAA”) for approval on the 2022 ballot. The CFPEAA would eliminate an employee’s ability to collect civil penalties under PAGA as a representative action. Instead, the Division of Labor Standard and Enforcement (“DLSE”) would be responsible to enforce employer violations of the Labor Code and the administration and collection of accompanying penalties.

If approved, CFPEAA represents California employers’ brightest hope since 2017 that the virtually unimpeded avalanche of PAGA claims brought against them might subside. Until then, rest assured that Poole Shaffery & Koegle, LLP’s experienced employment attorneys and staff can help your business potentially avoid PAGA, and the underlying California Labor Code Wage and Hour claims. Contact our offices to speak with an attorney that specializes in helping businesses like yours to survive and thrive.