July 20, 2016
Compliance Matters
SM                                                                                                 Newsletter
PAGA Lawsuits To Receive Increased Oversight  
Back in 2004, California adopted a novel approach to enforcing Labor Code violations when it enacted the Private Attorneys General Act ("PAGA"). This law allows a private citizen to pursue civil penalties on behalf of the State of California Labor and Workforce Development Agency ("LWDA"), provided certain notice provisions are followed.             

PAGA essentially "deputized" employees and their lawyers to pursue fines that would normally only be available to the State of California. Since its enactment in 2004, employers have been flooded with PAGA lawsuits that are expensive to defend and carry massive penalties for even the most minor Labor Code violations.  The stakes were made even higher after a pair of decisions by the California Supreme Court made these cases more attractive to lawyers by allowing PAGA suits to be brought without having to satisfy the requirements for class certification, and by prohibiting employers from requiring employees to sign a class action waiver forcing the employee to submit his or her claim to individual arbitration.
In response to the recent proliferation of lawsuits filed under PAGA, Governor Jerry Brown recently signed into law several important amendments that will immediately affect all pending and newly filed PAGA lawsuits.
Under PAGA, which is commonly referred to as the "bounty hunter law," any "aggrieved employee" is authorized to seek civil penalties on behalf of other current and former "aggrieved employees" and the LWDA. This means that PAGA lawsuits have emerged as a way for would-be plaintiffs to litigate a "representative" action that is similar to a class action, but without the onerous burden of satisfying class action requirements. Courts can award up to $200 per employee per pay period for each violation of the Labor Code, with 75% of any recovery paid to the State and the remaining 25% going to the affected employees. The lawyers bringing the case are also entitled to recover reasonable attorney's fees, which are often higher than the underlying penalties. PAGA settlements require court approval. PAGA lawsuits are typically litigated as aggressively as full blown class actions and are extremely costly to defend.
Up until now, PAGA lawsuits are initiated after aggrieved employees or their representatives send a perfunctory letter to the LWDA setting forth the purported labor law violations. If the LWDA does not investigate the allegations, aggrieved employees can file a PAGA lawsuit 33 days after sending the notice letter to the LWDA. In our experience, the LWDA almost never investigates these claims, leaving the employees and their lawyers free to file suit. Amendments that were adopted last year permit employers to cure certain technical paystub defects during this 33-day window( 11/3/15 - Gov. Brown Signs Bill Giving Employers a Limited Grace Period to Correct Two Common Pay Stub Violations).  
New Amendments
The new amendments seek to tighten up some of these procedural requirements to give the LWDA more oversight over PAGA lawsuits. Highlights of the new PAGA amendments are summarized below:
  • New PAGA claim notices must be filed with the LWDA online and accompanied by a $75 filing fee;
  • Employer "cure notices" or other responses to a PAGA claim must also be filed online, with a copy sent by certified mail to the aggrieved employee or the employee's representative;
  • The LWDA has 60 days to review a PAGA notice (previously 30 days);
  • An aggrieved employee cannot file a PAGA lawsuit until 65 days after submitting information to the LWDA (previously 33 days);
  • When filing a new PAGA lawsuit in court, a filed-stamped copy of the complaint must be provided to the LWDA. (Applies only to cases in which the initial PAGA claim notice was submitted on or after July 1, 2016.);
  • A copy of any proposed PAGA settlement must be sent to the LWDA at the same time it is submitted to the court for approval and a copy of the court's judgment or any order that awards or denies PAGA penalties must be provided to the LWDA.
It remains to be seen if these amendments will help to stem the growing tide of PAGA lawsuits. However, what is certain, is that because potential PAGA lawsuits will be subject to greater scrutiny by the LWDA, employers must be even more vigilant to ensure they comply with the Labor Code.
If you have any questions about this article, please contact any member of the Firm. We can be reached at (818) 508-3700, or online at www.brgslaw.com .

Richard S. Rosenberg
Jeffrey P. Fuchsman
Katherine A. Hren
Rami A. Yomtov
Ballard Rosenberg Golper & Savitt, LLP

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Matthew Wakefield:
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