PAGA settlements and the unintended consequences on California workers – Orange County Register

Along with movie production and technology, California now leads the nation in mass layoffs. The numbers are stark, California has currently laid off more than three times as many employees in mass layoffs this year than Texas, America’s second largest state. Recent research produced by the California Business and Industrial Alliance points to the culprit: the Private Attorneys General Act (PAGA). 

PAGA allows employees to bring lawsuits against employers on behalf of themselves, other employees, or even the state of California. While originally conceived to protect employees working in under-the-table businesses, PAGA lawsuits have significantly increased since the law was implemented and target regular businesses, often for minor offenses. 

Another failure of PAGA to benefit employees is revealed by looking at the impact of PAGA lawsuits on the viability of legitimate businesses and the job security of their employees. According to research by the California Business and Industrial Alliance, employers subjected to PAGA lawsuits were far more likely than employers not sued to issue a WARN notice – a notice signifying a mass layoff of 50 or more employees, or a company going out of business.

The numbers are clear. Employers subject to a PAGA settlement were 258 times more likely to issue a WARN notice in fiscal year 2021/2022, and 126 times more likely to issue a WARN notice in fiscal year 2022/2023. 

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The average PAGA settlement cost for each of these employers was almost $4 million in the past fiscal year, with an average attorney fee of over $1 million. In other words, an unexpected cost of approximately $5 million for the businesses impacted – something that would have a disastrous effect on all but the biggest corporations. 

In the 2022-2023 fiscal year, employers endured a major upsurge in PAGA lawsuits compared to the previous year. Subsequently, the number of employees subjected to WARN notices increased from 1 million to a whopping 3 million – and there is no sign of this slowing down anytime soon.

Outside of these raw numbers, PAGA causes a number of other issues. 

The overflow of minor PAGA lawsuits, some of which can be as small as a typo on a paystub, drowns out legitimate claims of serious labor law violations. Why? Due to the threat of hefty fines, employers are now more likely to settle PAGA lawsuits even if they aren’t legitimate. As a result, employees who have actually been harmed by their workplace are less likely to get justice. 

Who benefits the most from PAGA? The private trial lawyers who have been given a greenlight to pick through California’s thousand-page labor law code in search of any minor infraction to turn into a meal ticket. Over the last six years, private trial lawyers have exploited California employers through PAGA settlements to the tune of $8 billion. In truth, PAGA lawsuits are now driven more by the pursuit of personal gain – not genuine concerns about labor law violations.