The Private Attorneys General Act (PAGA) authorizes disgruntled employees to recover civil penalties on behalf of themselves, other employees, and the State of California. PAGA was originally enacted to help California regulate its underground economy, but it also allows employees to act as an enforcement agency and sue for virtually every labor code violation, not just serious violations or those related to health and safety.
These lawsuits, often brought by plaintiffs’ law firms, also aim to take advantage of California’s new laws on worker classification. California has long sought to classify most workers as employees, and this was made possible by the 2018 Dynamex decision of the California Supreme Court and the enactment of AB5 in 2019. While most news articles discuss how Dynamex and AB5 affect large companies like Uber and Lyft, what about the small business owner?
These new laws apply to all California business owners, and law firms are rushing to cash in. Entire law firms have been established just to pursue and profit from PAGA. These lawsuits allow plaintiffs to pursue not just the assets of the business itself, but also the assets of the individuals who own the business. While some of the 5,000 PAGA lawsuits filed each year are fair and reasonable, many are designed to take advantage of the law and can seriously devastate an independent business.
For example, a solar panel company in Ahaheim was sued for allowing their employees to clock in a little early and out a little late—before their shifts began and ended—as a courtesy to earn additional income. Those extra minutes on the clock meant the company was unknowingly violating labor law by not giving its employees enough rest breaks, even though those extra moments were spent socializing, smoking, or eating breakfast. As a result of the lawsuit, the company has racked up millions of dollars in debt and was forced to cut their workforce from 175 employees to eight.
An event rental company in Van Nuys was sued by two former employees for being terminated. Their lawyer, using the PAGA act, did more than go after the company for termination and filed a lawsuit for $29 million over alleged missed lunch breaks. A janitorial service provider in Southern California recently agreed to a $5.4 million settlement in a class-action lawsuit on behalf of 3,000 employees. The employees claimed they were not reimbursed for the use of personal cell phones to communicate with their supervisors. The list of frivolous PAGA lawsuits that have been filed in the past couple of years is long, and unfortunately continues to grow.
If you are a California business owner, your personal assets, including your home, may be exposed to a PAGA lawsuit. In just the past two years we have represented dozens of California business owners facing these types of lawsuits.
We specialize in protecting our clients’ assets from plaintiffs and creditors, and have completed over 3,000 transaction over the past 20+ years. If you are facing a possible PAGA action, please call us to learn how we can protect your business and personal assets.
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