(CN) – When California was in the throes of a budget crisis 15 years ago, state legislators created the Private Attorneys General Act, or PAGA, to let employees wronged by their employers to sue on the state’s behalf while represented by private attorneys. The law has allowed more employment complaints to be brought to justice, but employers say attorneys looking to make a quick buck are cashing in on the state’s lack of oversight.
Last month, the California Business & Industrial Alliance sued the state alleging PAGA is unconstitutional as it’s written and used by attorneys “for their own benefit.”
More than 35,000 PAGA notices have been filed by trial attorneys since the law went into effect, and over 100 law firms have sent 50 or more PAGA notices, according to the Nov. 28 lawsuit in Orange County Superior Court.
But Eric Kingsley of Kingsley & Kingsley in Los Angeles said even though his firm is listed as filing the second highest number of PAGA notices – 599 – that number over the 14 years PAGA has been in effect “is not that many.”
In an interview, Kingsley disputed an argument the California Business & Industrial Alliance made in its complaint that employees are not fairly compensated, including in many high-profile PAGA cases where employees received around $100 while attorneys received upwards of millions of dollars in attorney’s fees.
“The statute was never intended to compensate employees … that’s not what PAGA is for,” Kingsley said in noting the state collects 75 percent of settlements while employees get 25 percent.
He called the state’s task to enforce its labor laws “daunting” and noted labor officials tend to focus on impacted industries like the garment industry and agriculture because there aren’t enough resources to fully fund labor enforcement.
“I wouldn’t imagine a chamber-backed organization would want to increase [regulation] to add hundreds of employees to the state payroll,” Kingsley said in response to California Business & Industrial Alliance’s suggestion the state can better ramp up its labor enforcement arm with its current budget surplus.
Mariko Yoshihara, legislative counsel and policy director for the California Employment Lawyers Association, said the increase in PAGA lawsuits over the past several years is a “direct result of an exponential rise in forced arbitration agreements that workers are routinely required to sign as a condition of employment.”
Because the California Supreme Court found PAGA claims cannot be forced into individual arbitration, Yoshihara noted, more cases are being filed.
“PAGA now stands as a critical and one of the last remaining tools for workers in California to take collective action to remedy violations of their rights under the Labor Code,” Yoshihara said in noting the statute has a built-in mechanism to prevent “extortive, abusive or unconstitutional enforcement” by allowing courts to reduce penalties against employers as they see fit.
PAGA, the only recourse for break and overtime violations
Piper Barnard, a nurse who worked at Twin Cities Community Hospital in Templeton, California, from 2009 to 2017, didn’t know she had signed an arbitration agreement until her attorney Lauren Teukolsky requested her personnel file from the hospital.
She and over 50 other nurses who didn’t receive rest breaks during 12-hour shifts couldn’t file a class action due to the waivers and went to arbitration with the hospital, with a handful of the nurses also suing under PAGA.
Barnard said she had to step off the hospital floor in order to use the restroom, which often meant violating California’s nurse-to-patient ratio in the hospital’s ICU unit and putting patients at risk.
“Our patients could code at any moment; five minutes to a coding patient is an eternity, it’s enough time to lose brain function,” Barnard said in an interview.
After the nurses filed their PAGA complaint in 2015, they started getting breaks: The hospital made “break nurses” who cover shifts while nurses took meal and rest breaks more widely available.
Barnard said it is “frustrating” when people suggest attorneys file PAGA cases to generate legal fees, saying the hospital “made a point to drag out the PAGA complaint for years” by not responding to requests for documentation.
Teukolsky confirmed she has “yet to see a dime in attorney’s fees,” which she pointed out she is not guaranteed to recover.
Leonard Acevedo, a call center employee at for Cash Call for six months, said he included all his overtime hours on his timesheet – typically working from around 4 a.m. to past 6 p.m. But when it came time to turn in his timesheet, Acevedo said his supervisor would tell him he went “way over” his approved overtime and to adjust it.
“I knew it wasn’t right but I needed the job, so I kept my mouth shut like everybody else in there,” Acevedo said.
“But I refused to play that game of not working on the clock, which saved me because I had documentation of original hours worked and readjusted hours and that helped in my lawsuit,” he added.
Acevedo said Cash Call would supply dinner and require employees to work unpaid overtime on days commercials aired in Southern California in order to field calls from people looking to take out loans.
Acevedo’s attorney James Cordes said the arbitrations have ended but the PAGA case is ongoing.
Because Cash Call has a high turnover rate, with many employees working only six or eight months, Cordes said it’s hard to find attorneys willing to take on cases since the employee probably didn’t rack up that much in unpaid overtime.
“A lot of people say ‘lesson learned’ and write it off, and that’s how companies get away with what they are doing,” Cordes said.
Employers pay millions for violating PAGA
Richard LoGuercio is the owner of Town & Country Event Rentals, a party and event rental business in Los Angeles. He told Courthouse News two of his former “right-hand guys” sued him under PAGA after LoGuercio discovered they were stealing from the company and fired them.
The lawsuit’s price tag: over $2 million, LoGuercio said.
LoGuercio’s business has a fleet of 125 trucks with crews; he employs 700 full-time employees. He said employees “don’t take their lunch breaks – they take them when they want,” and that “nobody has ever come to me in all these years and said ‘Boss, I missed my lunch.’”
He added, “My guys want to eat their lunch when they want. I’m not their mother; who is the state of California to be the nutrition specialist?”
Following the settlement, LoGuercio said he added two full-time administrative staff members to make sure his business is in compliance with state labor laws.
Vincent Passanisi, an Italian restaurant operator and owner of food product manufacturing company Santa Fe Importers, was hit with two employment lawsuits by the same employee within a year, including a $500,000 PAGA suit that almost cost him his business.
Passanisi said employees at his USDA meat plant start work as early as 5 a.m. but still wanted to take their lunches at “lunch time,” in violation of the state labor code on meal periods.
When Passanisi shared the lawsuit notice with his attorneys they said “I’m afraid to tell you this, but this is basically legal extortion even though you’re not really doing anything wrong,” according to Passanisi.
“My defense attorney came to interview my employees and nobody had any complaints. But now they’re furious because they’re taking their lunch at 10:00 in the morning and all I can say is ‘Sorry gang, that’s California law,” Passanisi said.
Following the lawsuit, Passanisi said “we tightened things up” including dropping his payroll processor because it rounded employee timecards to the nearest hour, which could violate state labor laws.
Passanisi said “there needs to be an opportunity for businesses to correct, or the penalties need to be in line with the actual violations, or the state just needs to take back the job of enforcing those laws.”
He said his meat plant has a USDA inspector on-site for all hours of production and that if a mistake is made by an employee who, for instance, fails to wash their hands or clean an area “we might increase training or have corrective actions and yet we’re not paying hundreds of thousands of dollars in penalties.”
He added, “Instead we’re all working together for a common purpose to produce products that are safe and high quality.”