California employers often appear stuck between the proverbial rock and a hard place as they seek to navigate the pandemic, remain in business and protect jobs. While state, county and municipal authorities have forced businesses to scale back or close, plaintiffs’ attorneys use advertising campaigns to entice disgruntled employees who have lost their jobs to bring claims for free against their employers. Many claims are filed each day under California’s Private Attorneys General Act (“PAGA”). In fact, plaintiffs’ attorneys continue to file an average of over 18 new PAGA claims every day. The ALERT has featured articles on this situation in each issue since March to bring it to the business community’s attention.

1. Overview Of PAGA Claims

PAGA (also called the “bounty hunter law”) provides a pathway for plaintiffs’ attorneys to bring claims online for a nominal cost. Specifically, PAGA allows current and former employees to act as a “private attorney general” and seek civil penalties for alleged Labor Code violations. Before filing a lawsuit asserting PAGA claims in court, an “aggrieved employee” must submit a claim to the Labor and Workforce Development Agency (“LWDA”) and provide notice to the employer. 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 an enforcement action in court as the so-called “proxy” of the state.

Throughout the pandemic, plaintiffs’ attorneys across California have attempted to profit from PAGA and the devastating job losses caused by the pandemic. Some file the same boilerplate claims against one employer after the next, despite the fact that many businesses have closed or curtailed operations due to government mandates. For example, on a single day, November 18th, two days after many counties and 94.1% of California’s population were moved into the most restrictive reopening tier (known as the “Widespread” or purple tier), 43 new PAGA claims were filed.

2. PAGA Claims Are Up, Despite The Pandemic

Over 4,800 PAGA claims have been filed since March 1, 2020. Specifically, 632 claims were filed in March, 548 were filed in April, 557 were filed in May, 600 were filed in June, 616 were filed in July, 533 were filed in August, 549 were filed in September and 533 were filed in October.

Notably, the number of PAGA claims has been staggering for years because the claims are so easy to file, even if they are speculative or baseless. The pandemic highlights the concern for businesses. Over the past eight months, the number of new claims increased by 7% when compared to the filings in the eight months before Governor Newsom declared a state of emergency.

3. Plaintiffs’ Attorneys Prosper As Businesses Continue To Struggle

Despite the pandemic, plaintiffs’ attorneys continue to sue employers with the same claims, often without conducting any meaningful investigation of the facts. These claims now threaten business recoveries and the California economy, and are particularly devastating for small employers, new businesses and those struggling to survive. Even unsubstantiated claims force employers to incur substantial defense costs or settle claims that are meritless. These expenses can result in even greater job losses and business failures.

Even businesses on the front lines of the pandemic have been targeted. Over 30 hospitals, medical centers and nursing homes have been named in PAGA actions filed against them since the state of emergency was declared on March 4.

Plaintiffs’ attorneys view PAGA’s penalty structure and one-sided attorney’s fee provisions opportunistically. PAGA’s default civil penalty is $100 for each employee for every pay period for the first Labor Code violation. The amount can increase to $200 for subsequent violations. Plaintiffs’ attorneys can exploit the system to invest a filing fee of less than $100 and then pursue a million dollar recovery in California’s PAGA lottery.

Many are surprised to learn that the state actually shares in PAGA recoveries. In fact, the government is financially incentivized to encourage PAGA litigation at the expense of employers, especially as budgets are stretched thin due to competing disasters. Employees receive 25 percent of any PAGA penalties collected, while the State of California receives 75 percent. And, plaintiffs’ attorneys take their fee off the top.

More information on PAGA is available in Castle Publications’ new book, California’s Private Attorneys General Act (PAGA) — Litigation and Compliance Manual, by Attorneys Richard J. Simmons, Jason W. Kearnaghan and Daniel J. McQueen.

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