The state of California is at a crossroads. Everywhere you look, you can’t escape the political or economic turmoil that makes you feel like the Golden State is at a breaking point. Whether it’s the pandemic recovery, the housing crisis, or our state’s abysmal business climate, the citizens of California are clearly expressing their anger with their feet.
For the first time in its 171-year history, California is losing one of its 53 seats in the United States House of Representatives due to families and jobs leaving the state. Nobody wants to see their neighbors leave the state that so many of us call home. But unless our leaders make hard choices, why should we expect this exodus to change?
Reform PAGA to help workers and employers, not lawyers
Right now, we need practical solutions that will produce real results that will improve the lives of all Californians. One obvious solution would be to reform our state’s disastrous PAGA laws. Many entrepreneurs who have left California for friendlier business climates know PAGA all too well.
PAGA stands for the Private Attorney General Act, which was passed by the California legislature in 2004, delegating private attorneys to sue employers for millions of dollars in penalties for technical violations of California’s labor code. The original rationale for PAGA was to bolster the limited resources of the Attorney General‘s office to enforce unpunished violations of the labor code.
Regardless of the law’s original intent, PAGA has become a job-destroying behemoth allowing profit-hungry prosecutors to earn large salaries at the expense of California workers and the small business community. Under PAGA, the biggest risk a business owner in California can take is giving someone a job. This hurts businesses, workers and our community.
PAGA has become a “vehicle of legalized extortion”
As an attorney representing small businesses in the Central Valley for over 20 years, I have been fighting PAGA since the day Gray Davis signed it into law. PAGA’s imperfect structural incentives allow an employee, with the help of enterprising attorneys, to bring frivolous lawsuits against employers on behalf of not only themselves, but their co-workers as well.
PAGA violations can be stacked per employee, per pay period, which can skyrocket those fines for innocent violations as small as time stamping irregularities or lunch break policies. PAGA has become a vehicle for legalized extortion, the outcome of which the public never sees, as most occur in resolutions negotiated in lawyers’ boardrooms.
This system is bad for workers, bad for employers and only benefits lawyers.
Most of the money doesn’t reach those who really need it
There is no insurance available that covers this potential liability and greedy lawyers are well aware of this fact. I primarily represent small family farms and agricultural service businesses who often find themselves unable to afford the costs of legal defense in court and are forced into costly settlements just to save their livelihoods, even if ‘they are completely innocent, and even though they paid their employees properly, their only violations are technical.
Unfortunately, these PAGA cases always end the same way: scraps for each worker and attorney fees that are tens, if not hundreds of times more than what an individual worker will receive.
The law says that 75% of penalties collected in PAGA lawsuits go to the State of California, and 25% will be crumbs scattered among thousands of workers. Subtract the massive legal fees collected by trial attorneys, and there‘there isn’t much left.
The lawyers win and everyone else loses.
PAGA benefits lawyers at the expense of businesses and CA workers
This corrupt cycle of injustice is despicable and fuels lawyers with millions of dollars at the expense of hard-working California families who have strived for business excellence. It strangles a labor market that needs a bold recovery, not fear of legal extortion. It is high time for California industries to unite against this madness.
PAGA reform should be an easy choice for our lawmakers who want to curb the influx of businesses leaving our state. As California faces many other political and economic challenges, restoring our state’s legacy as the best place in the world to start a business should be our compass.
Without these changes in PAGA, CA‘The toxic legal environment will continue to slowly strangle economic opportunity and prosperity for all.
About the Author
Antoine Raimondo represents Central Valley farmers and small business owners as an attorney and president of Raimondo and Associates.