California Trade Group Fires Salvo Against Attorneys & State

California Capitol building.

SANTA ANA, Calif. (CN) — A California trade organization has sued the state, claiming its Private Attorneys General Act unconstitutionally allows private attorneys to abuse the law for personal gain.

The California Business & Industrial Alliance calls the Private Attorneys General Act of 2003, or PAGA, a “harmful law” which was “conceived as a means to help employees right workplace wrongs without further burdening the state bureaucracy” but which is unconstitutional as written and practiced by private attorneys who “use the law for their own benefit.”

In an Op-Ed published in the Orange County Register, California Business & Industrial Alliance founder Tom Manzo said “lawyers make out well with PAGA, but the same can’t always be said for the employees.” He cited class-action settlements with Walmart, Uber and Google in which employees received around $100 apiece or less but attorneys made millions of dollars in fees.

The trade group claims private attorneys have filed thousands of lawsuits against businesses, nonprofit organizations, “and even labor unions,” and have been “allowed to negotiate settlements that enrich themselves at the expense of everyone but themselves.”

More than 35,000 PAGA notices have been filed by trial attorneys since the law went into effect, and more than 100 law firms have sent 50 or more PAGA notices, according to the Nov. 28 lawsuit in Orange County Superior Court.

Under PAGA, individual California employees may be “deputized” to sue their employers on behalf of the state for more than 150 Labor Code violations. But the Labor Code does not require their attorneys to coordinate with state officials about their claims and no state oversight is conducted over the lawsuits, according to the complaint.

These circumstances have contributed to a perfect storm, in which “the complete lack of oversight by the legislative, executive and judicial branches of the California state government has allowed PAGA to become a tool of extortion and abuse,” according to the 54-page complaint.

“PAGA provides no means by which the government can monitor the litigation or later step in to oversee negotiations or ensure that the government’s interests are adequately represented and/or compensated in settlement agreements or litigation,” the complaint states.

The trade group claims nominal defendant Attorney General Xavier Becerra violates the Eighth Amendment prohibition of excessive fines and unusual punishment and the Due Process and Equal Protection clauses of the 14th Amendment. It claims PAGA also violates the California Constitution’s Separation of Powers Doctrine.

It seeks declaratory judgment that the law is unconstitutional in whole or in part, reformation of the law, and a restraining order and permanent injunction against its enforcement. It is represented by Richard Frey with Epstein, Becker & Green in Los Angeles.

The lawsuit does not attack only PAGA; it claims “many of the California labor laws are unclear, cumbersome, counterintuitive, impossible to follow or all of the foregoing.”

Ambiguities involving employers’ requirements to provide benefits such as meal and rest periods carry “the prospect of business-crushing lawsuits,” according to the lawsuit.

“The California labor laws contain a daunting and confusing web of obligations for employers, robust and generous remedies for employees and a framework that encourages enforcement through private litigant access to the courts,” the complaint states.

Court approval of PAGA settlements “is strikingly different from the oversight for class actions,” since “the statute suggests an extremely limited inquiry” and does not even require a court to review an entire settlement, according to the complaint.

The California Business & Industrial Alliance did not immediately return an email request for comment.

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