What Does PAGA Means To Your Business
What Private Attorneys General Act ( PAGA ) Means To Your Business
The Labor Code Private Attorneys General Act (PAGA) authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for Labor Code violations.
PAGA lawsuits are not like your traditional class action suits where a group of employees come together to seek damages against an employer. Instead, a single employee can initiate, and any other employees that were affected by the same alleged violation are automatically included.
How Are PAGA Penalties Calculated?
PAGA lawsuits don’t involve damages, but rather penalties — 75 percent goes to the California Labor and Workforce Development Agency and the other 25 percent goes to the employee or employees. Penalties range from $100 to $200 per employee per pay period during the time of the violation.
It has been noted that large companies with hundreds or thousands of employees have mainly been the target since the law was enacted back in 2004. But the laws still apply to companies of any size with employees in California — even if the company isn’t headquartered in the state. Small businesses in California have also been effected, so you are not safe from PAGA law suits.
Why Are There So Many Law Suits Against Employers?
Your employees and their would-be attorneys were given a tremendous power by the State of California in 2004. It did take them and the rest of the legal community a little while to it figure out. The law, titled the Private Attorney General Act of 2004 (“PAGA”), gives employees in California the right to bring a lawsuit against their employers for any violation of the California Labor Code. In short, it allows employees to step into the shoes of an enforcement agency like the Division of Labor Standards Enforcement and recover civil penalties on behalf of the California Labor Workforce Development Agency for aggrieved employees and their coworkers.
PAGA allows employees to sue for almost every Labor Code violation, not just serious violations or those dealing with health and safety. And that aspect of the law was where the value of PAGA as a litigation tool was eventually recognized by the plaintiff’s bar. Here’s why a PAGA claim can be so much more harmful to an employer than a regular Labor Code violation or Unfair Business Practices claim.
What are the Main Components of PAGA
PAGA has two main components that affect employers. First, PAGA gives employees the authority to sue as so-called Private Attorneys General to recover these monetary penalties for an employer’s violation of the California Labor Code. Before the enactment of the PAGA, employees could not bring civil actions in court to enforce non-monetary provisions in the Labor Code; only the State Labor Commissioner through the Division of Labor Standards Enforcement (“DLSE”) could do so.
The second component of PAGA is that it imposes monetary fines on employers for each violation of almost every single provision in the California Labor Code. If the Labor Code does not already provide for a penalty, the PAGA imposes on the employer a $100 fine for the first violation and $200 for each subsequent violation of the same provision.
What is scary, is these fines can be assessed for each employee or for each pay period, when applicable. If the Labor Code already provides for a civil penalty for the underlying violation, the employee can sue to recover that penalty on behalf of similarly aggrieved employees.
How Do You Protect Your Business From a PAGA Law Suit?
Understand California Labor Code Requirements
PAGA lawsuits can apply to basically any violation of the California labor code. There are numerous provisions that apply, but there a few that tend to come up regularly in PAGA lawsuits:
- Failure to provide a half hour lunch break for non-exempt employees
- Failure to provide regular breaks,
- Improper overtime calculations,
- Paying below the minimum wage,
- Bonuses that weren’t properly calculated,
- Not including one of the nine specific pieces of information that must appear on wage statements in California
- Not providing suitable seating
It’s not an easy feat for businesses to follow the complexities of the Labor Code and the Industrial Welfare Commission (“IWC”) Wage Orders as they relate to a particular employer’s business.
Many employers believe they are in complete compliance. However, because there are thousands of provisions in the Labor Code, all of which now can present an expensive trap for employers who are not careful. And because the Labor Code incorporates provisions from other codes, the list seems to keep on growing.
Create Compliant Policies For Your Business
Once you know the basic requirements that you have as an employer, you need to create specific policies that reflect those requirements. Rules and processes will ensure that you, your team and your leadership are all on the same page about what to expect, hopefully helping you avoid any employee issues in the first place.
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Review Policies Regularly to Be Sure Those Policies are Being Followed
But it’s not enough just to have those policies. You also need to uphold and enforce them on a daily basis. If management knows they need to offer lunch breaks to employees within the first five hours of a shift but they fail to do so whenever it gets busy, they’re opening you up for lawsuits. Performing regular audits of managers or others in leadership positions to make sure they’re following the processes you set out.
Good Record Keeping is Essential
You should already be keeping records of things like payroll and employee time sheets. But because of this type of lawsuit, it’s even more important to hold onto that data in case someone does come forward with an alleged violation. If someone says you didn’t provide proper breaks during a specific time period but you have time cards that prove employees received them, it could save you a lot of time, stress and money.
Take Care of Any Issues Immediately
When an employee brings forth a PAGA lawsuit, it starts with them notifying the California Labor and Workforce Development Agency and the employer, usually through an attorney. When this happens, the employer has 33 days to fix the alleged violation before the lawsuit is officially filed. So if you do find your business in this situation, it’s in your best interest to act quickly to fix the situation so you don’t end up strapped with large penalties that could cripple your small business.
PAGA is clearly gaining strength as a tool for plaintiff’s employment attorneys. In light of this, employers should be preemptive in aggressively attempting to identify potential bases for claims against them of non-monetary Labor Code violations. Once identified, those issues should be quickly remedied. Otherwise, the first and last notice to an employer that a potentially-costly problem exists will be in the demand letter sent on behalf of an aggrieved employee by his or her attorney
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