From the Experts: California’s Private Attorneys General Act Spawns Ever-Increasing Wage-Hour Litigation

This month’s expert is
Laura E. Innes, an attorney with the South
San Francisco law firm of Simpson, Garrity &
Innes.

In 2004, the state
Legislature enacted a new law allowing California
employees to sue their employers as so-called “private attorneys general” to
recover penalties (and attorney’s fees) for state Labor Code violations. Before
the Private Attorneys General Act (PAGA), individual employees could not
enforce most of the Labor Code’s penalty provisions in civil court. Instead,
enforcement was the labor commissioner’s domain through its Division of Labor
Standards Enforcement (DLSE). What’s more, before PAGA, many Labor Code
provisions did not even carry consequences for violating them.

What Has PAGA Wrought?

PAGA has empowered and encouraged
employees and their attorneys to enforce these penalty provisions in civil
actions—and the upshot has been a dramatic increase in wage and hour lawsuits.
Of course, the potential to recover penalties and attorney’s fees is itself an
inducement to bring a wage and hour lawsuit. But PAGA also allows employees to
aggregate the claims of many employees similarly affected by the violation
without the complications of formally bringing a class action lawsuit. And,
prevailing “class action” lawyers in PAGA cases are guaranteed payment of their
attorneys’ fees and costs. For plaintiffs’ attorneys who work on the “volume”
principle, this provision is a boon. If they can find just one violation at a
large company, the potential fees generated to enforce an action (times
hundreds of affected employees) can be very lucrative.

Wage and hour litigation
is much simpler and more straightforward than discrimination or wrongful
termination cases because the employer’s intent isn’t relevant. What is
relevant includes: the time the employee was working (start and stop times),
which tasks the employee performed while working, how the employee was paid,
what the payroll documentation contains, whether the employee took a meal
break, and whether the employee was able to take a break or not. These factual
inquiries are not nearly as susceptible to interpretation as the “facts” are in
a discrimination case.

Taken together, these
elements—penalties, attorney’s fees, litigation on a representative basis, and
factual simplicity—have created a “perfect storm” of wage and hour litigation.
It is worthwhile, therefore, for employers to revisit the basics of PAGA.

The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.

The Penalties

PAGA covers every
provision in the Labor Code. Penalties that were included in provisions before
PAGA was enacted will remain the same, but PAGA gave employees the right to
bring their own civil lawsuit to enforce these penalties rather than have to
ask the labor commissioner to do so. If no penalty existed before, PAGA added a
$100 penalty for first violations and $200 for each subsequent violation. The
penalties are assessed on a per employee, per pay period basis. So, for an employer
with semi-monthly pay periods and 25 employees who fails for a year to provide
a proper paycheck stub (violating Labor Code Section 226), the penalties mount
up to $60,000—that’s 25 employees multiplied by $100, multiplied by 24 pay
periods.

If there’s more than one
type of violation, penalties increase exponentially. For example, a pay stub
violation claim is usually combined with unpaid overtime allegations or charges
that employees did not get the full meal period relieved of all duties, so the
penalties add up.

Strict Administrative
Requirements

The good news is that
PAGA requires employees to exhaust very structured administrative remedies
before filing suit (provided that the employee is suing to enforce a Labor Code
provision that prior to PAGA could only be enforced by the DLSE). PAGA requires
an aggrieved employee to give written notice by certified mail to both the
Labor and Workforce Development Agency (LWDA) and the employer of the purported
Labor Code violations. In some cases, the employer must even be given an
opportunity to cure the alleged violation.

The LWDA then has 30
days to decide whether to investigate. If it either declines to investigate or
investigates and doesn’t issue a citation, the employee is then free to file a
lawsuit. These procedures apply to the numerous wage-and-hour provisions,
which, before PAGA, contained specific penalties, in addition to the Labor Code
provisions whose penalties were created by PAGA.

California courts have held that compliance with
the PAGA administrative structure is absolutely required when the suit seeks a
civil penalty that, before PAGA, was enforceable only by the DLSE. But for
those penalties that employees could enforce prior to PAGA, such as for waiting
time and meal and rest break penalties, there’s no need to comply with the
administrative prerequisites.

What to Do?

It’s wise to perform a
self-audit to make certain that your company complies with all provisions of
the California Labor Code. Be as diligent about complying with the nonmonetary
provisions of the code (such as posters, content of pay stubs, and name of bank
on paychecks) as you are in ensuring, for example, that all hours worked are
properly recorded and paid and that employees receive appropriate meal and rest
breaks.

If you receive a PAGA
notice, consult with an employment lawyer to determine if you can take
advantage of the PAGA “cure” period to make it right with the employee and
avoid the more costly alternative of litigation.