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NO REST FOR THE WEARY: EMPLOYERS LIKELY TO FACE INCREASE IN PAGA ACTIONS THROUGHOUT THE COVID-19 CRISIS


Despite nationwide shutdowns forcing employers to decrease or completely shut down their businesses, Private Attorneys General Act (“PAGA”) filings by plaintiffs’ attorneys have not slowed down since Governor Newsom declared a state of emergency on March 4, 2020. While the economy and businesses are reeling from the pandemic and the government’s stay-at-home orders, plaintiffs’ attorneys across California have piled on, often filing the same boilerplate claims against one employer after the next.

Before filing a lawsuit in court, an employee must submit a notice to the Labor and Workforce Development Agency (“LWDA”). The LWDA has the option to review and investigate the employee’s claims. If it chooses not to investigate, as usually occurs, the employee may then commence a lawsuit as the so-called “proxy” of the state.

1. PAGA Claims Have Increased Beginning In March

The numbers are telling. Plaintiffs’ attorneys have filed over 1,560 notices to the LWDA since March 4, 2020. This represents an average of over 125 new claims a week while the vast majority of California residents were ordered to stay at home. This apparently did not discourage plaintiffs’ attorneys from filing claims online.

The amount of PAGA notices filed each month between March and May has increased during the pandemic in comparison with the previous three months. Additionally, PAGA filings increased by 12.5 percent in March 2020 compared to March 2019. While the amount of PAGA notices filed in April 2020 was about the same as those filed in April 2019, this is still outstanding considering California was under a stay-at-home order for the entire month, with many employers completely shut down. Thus, for employers who had one of the 548 notices filed against them in April 2020, decisions on furloughs, employee compensation and the future of their business is cast against a background of impending litigation.

PAGA (also called the “bounty hunter law”) provides a pathway for plaintiffs’ attorneys to bring unsubstantiated claims, forcing employers to incur substantial defense costs or settle claims that are often meritless. These expenses can result in even greater job losses and business failures. Specifically, PAGA allows an employee to act as a “private attorneys general” and seek civil penalties for alleged Labor Code violations. Employees cannot waive their right to bring PAGA claims by agreeing to arbitrate disputes, even though arbitration agreements can preclude class action litigation. Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014). More information on PAGA is available in Castle Publications’ new publication, California’s Private Attorneys General Act (PAGA) — Litigation and Compliance Manual by Attorneys Richard J. Simmons, Jason W. Kearnaghan and Daniel J. McQueen.

2. Plaintiffs’ Attorneys Are The Chief Beneficiaries Of PAGA Lawsuits

PAGA suits are costly to employers. And, while employees share in penalty recoveries, plaintiffs’ attorneys benefit far more than individual employees. PAGA’s default civil penalty is $100 for every employee for every pay period for the first Labor Code violation. This amount is increased to $200 for later violations under Labor Code § 26699(e)(2). PAGA claims have had devastating effects on small and medium-sized businesses as well as large companies. Yet, the damage to businesses does not help employees, as one Los Angeles Times Opinion piece pointed out. Employees receive only 25 percent of any penalty collected, while the State of California receives 75 percent. Although plaintiffs’ attorneys claim to “fight for the little guy,” they often take their fee from the 25 percent allotted to the employee, which can result in affected employees receiving a payout of a paltry $1.08.

Additionally, the statute has a one-way attorney fee provision that allows plaintiffs to recoup their attorneys’ fees if they are successful; but employers are not able to collect their attorneys’ fees if they win in court under Labor Code § 2699(g). Not surprisingly, one attorney who files numerous PAGA claims a year drives a Rolls Royce with a license plate that refers to PAGA. Meanwhile, at least 11 hospitals, medical centers and nursing homes have had at least one PAGA notice filed against them since the state of emergency was declared on March 4.

3. More Layoffs And Business Failures Can Be Expected

Across industries, employers have felt the strain COVID-19 has put logistically, economically, and emotionally on their businesses. Every business has had to face new challenges in this trying time and for some, their survival, and thus the survival of their employee’s jobs, is in jeopardy. Employers had to make rapid employment decisions during this unprecedented pandemic, and businesses are likely to face threats of litigation for these decisions, substantiated or not.

Senators are currently seeking broad liability protections for businesses to prevent lawsuits over COVID-19 exposure. Some states, such as New York, have provided litigation shields against certain health care providers. However, even if these liability protections were enacted in California, they may not protect against or even slow down PAGA claims as these protections may focus on personal injury and workers’ compensation-related lawsuits. The Wall Street Journal reports that plaintiff firms are targeting employers whose employees become sick after they reopen for business. However, employers are also worried about wage-hour lawsuits.

Plaintiffs’ attorneys will continue to file PAGA lawsuits in the upcoming months to take advantage of the quick decisions employers had to make in March and April when faced with the pandemic and the challenges that will arise when they reopen their businesses. Thus, employers should be cautious to comply fully with their legal obligations. Unfortunately, compliance does not guarantee employers they will not be sued under PAGA, given its one-way attorney fee provision.

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