California’s two-decade battle over PAGA labor law still rages

On Oct. 7, 2003, California voters decided to recall their governor, Gray Davis, less than a year after giving him a second term, and replace him with action movie star Arnold Schwarzenegger.

Five days later, in one of his last acts as governor, Davis signed Senate Bill 796, the Private Attorneys General Act, or PAGA, a unique-to-California law empowering workers to file class-action lawsuits against their employers, alleging violations of state laws governing working conditions.

Davis’ signature gave unions and personal injury attorneys a long-sought victory in their quest to gain the upper hand in employment disputes by supercharging what they contended was lackadaisical enforcement of labor laws by the state Labor Commissioner’s Office.

It was also Davis’ way of thanking unions and trial attorneys for standing by him during his two campaigns for governor and the recall election.

Business groups, of course, were and remain steadfastly opposed to PAGA, contending that it gives rapacious lawyers a hunting license to hector employers with suits or the threat of suits that are expensive to defend and even more costly to lose.

In the two decades since PAGA was created, there have been two parallel efforts by the contending forces. Unions and attorneys have sought to increase PAGA’s reach while employers have sought to undo what the Legislature and Davis had wrought.

In 2018, the state Supreme Court indirectly expanded PAGA’s potential impact by greatly restricting employers’ classification of workers as independent contractors exempt from state labor laws.

The Legislature then codified the decision a year later with Assembly Bill 5, converting millions of contractors into payroll employees, and ride-hailing companies such as Uber and Lyft responded by persuading voters in 2020 to exempt them from the new classification law.

The battle continued last year, when the Legislature passed and Gov. Gavin Newsom signed two bills to expand PAGA’s potential scope, one authorizing workers to essentially refuse to work if they believe conditions are unsafe, and a second requiring employers to disclose wage scales for current and potential employees.

As those laws were being drafted, however, California employers scored a partial win in the U.S. Supreme Court, which ruled that workers who had signed pre-employment agreements to arbitrate disputes with their employers could not use PAGA to pursue their claims.

These skirmishes have set the stage for two more PAGA battles, one in the state Supreme Court this year and one at the ballot box next year.

The state’s Supreme Court this month heard oral arguments in the case of an Uber Eats delivery driver who filed a PAGA suit alleging that he was unlawfully denied reimbursement for his expenses. In their questions to lawyers, the justices seemed to agree that the U.S. Supreme Court’s ruling on arbitration did not preclude the driver from using PAGA.

Meanwhile, however, a coalition of California business and employer groups, calling itself Californians for Fair Play and Accountability, has submitted enough signatures to place a measure on the 2024 ballot that would repeal PAGA entirely and bolster state labor law enforcement.

Employers allege that PAGA has been a vehicle for lawyers to claim millions of dollars in fees while doing little to help workers settle legitimate grievances. However, even were the initiative to gain voter approval and PAGA to vanish, the long-running conflict over the relative powers of workers and employers would continue.

Given that lawyers and unions often have more clout in the Capitol than employers, one can be certain that ballot measure passage would generate a new flurry of legislation.

The stakes for the combatants are just too large to be ignored.