Kevin Sullivan, Member of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s Los Angeles office, was quoted in the Los Angeles Business Journal, in “PAGA Compromise Gets Divided Response,” by Zane Hill. (Read the full version – subscription required.)

Following is an excerpt:

A compromise on the Private Attorneys General Act levies significant changes to the 20-year-old legislation, changes that have some plaintiff’s attorneys concerned with the fallout and employer defenders breathing a sigh of relief.

The legislation, colloquially called PAGA in legal circles, broadly allows employees to file civil lawsuits alleging labor code violations in the event the state attorney general declines to bring their case forward. Generally speaking, the reforms – approved by large majorities of the state assembly and senate and signed into law by Gov. Gavin Newsom in June – are designed to incentivize employers to correct alleged bad behavior and also boost payouts to employees in some circumstances while also allowing more discretion to judges to dictate terms of the cases. …

On the other side of the coin, employment attorneys who defend companies against these claims are happier. The reforms, some argue, will disincentivize suits over trivial claims and also increase options to make employees whole for actual violations.

“Any sort of curtailment on what has been going on for nearly 20 years with PAGA is a step in the right direction,” said Kevin Sullivan, a member at Epstein Becker & Green P.C.’s office in Century City. “It’s definitely a step in the right direction for businesses.”

Wanting to change the law

First enacted in 2004, PAGA was designed to give aggrieved employees options when the beleaguered California Labor and Workforce Development Agency did not pick up claims of labor code violations.

Proponents at the time contended that the state’s labor market was growing at a much higher pace than Sacramento could keep up with in terms of staffing labor enforcement officials. The law allowed private attorneys to file these challenges on behalf of the denied employees. Successful cases had employees collecting a quarter of the penalties and the state receiving the remainder, with them splitting the attorneys’ payout.

Employers have been frustrated with the law from the very beginning, often illustrating the plaintiff’s attorneys as filing the suits on specious grounds to make bank while rewarding the employees with relatively little. Having initially gotten into employment law on the plaintiff’s side, Sullivan said it was the act of taking businesses to task on “ticky tack” violations that drove him to the other side.

“I don’t think that, when it was introduced, the legislature really comprehended what kind of a monster PAGA would become,” he added. “With these types of lawsuits, where the employees – the allegedly aggrieved employees – get little. The government oftentimes gets little and it’s really the plaintiff’s attorneys who make out like bandits.” …

What the changes are

The reform legislation changes the penalty structure for employers who lose PAGA suits.

The new law imposes a lower cap on penalties for employers who take steps to cure violations and make workers whole after receiving the PAGA notice, or even before they receive notice of the suit. It also creates higher penalties for those found to have acted maliciously or fraudulently in their labor law violations. Employees also receive 35% of the penalties instead of 25%.

The reform also expands which violations employers can cure, allows courts to levy more generous terms for employers to cure and requires the plaintiff to have personally experienced the alleged violation – whereas before, a group of employees that experienced differing violations could combine on one PAGA action.

The compromise also gives judges more discretionary power to manage the size of these cases – like by having stricter criteria to be a plaintiff on the case. Sullivan said he felt this would disincentivize vaguely worded claims and require more specific allegations to be documented and filed. …

Will the landscape change?

Similarly, about half of Sullivan’s colleagues at the office are handling PAGA claims for their clients. He contended that plaintiff’s lawyers retain a lot of incentive to pursue these actions, but noted that there was more room for judges and defense attorneys to interrogate the extent of the allegations earlier on and find a more amenable resolution – making the employees whole for their underpaid wages or lack of required breaks, as examples – based on their veracity.

“What I think will happen more, particularly with this new cure provision, is perhaps earlier on we will investigate the alleged violations, seeing if really there’s some merit to the claims and conferring with clients whether they – if there is merit – want to try to correct these,” Sullivan added. “It’s really a rare day when the plaintiff will allege sufficient facts with the PAGA notice, truly apprise us of what they’re claiming. PAGA claims are frequently alleged in general, conclusory type language, rather than having specifics.”

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