Reform California Endorses Initiative to Stop Frivolous Lawsuits

California has the highest unemployment rate in the nation — and it’s only gotten worse in recent weeks after the restaurant workers minimum wage hike went into effect and businesses had to lay off many employees to stay in business. But a new measure on the November ballot could help reverse the destruction of jobs and small businesses in the state.

Reform California Chairman Carl DeMaio and a coalition of small business and worker advocates are backing a statewide ballot measure known as the Fair Pay and Employer Accountability Act. The measure would repeal the Private Attorney Generals Act (PAGA), which is a California state law quietly passed in 2004 that gives private labor law attorneys the right to act as de-facto state law enforcement agents in suing small businesses for alleged “labor law violations.” Read the full measure here >>

“PAGA has been a disaster for California and is being abused by politicians, unscrupulous lawyers, and special interests to shake down our state’s already struggling businesses — the financial losses are mounting, and jobs are being destroyed,” said DeMaio.

According to the California Business and Industrial Alliance (CBIA), before the passage of the PAGA in 2004, “employees could not bring civil actions in court to enforce non-monetary provisions in the Labor Code.” Like how labor code violations are enforced in every other US state, the California State’s Labor Commission performed that enforcement role.  

But in 2004, a group of eager trial attorneys approached California politicians and said passing PAGA would help take the burden off the State Labor Commission and bring more revenue to the state of California in the form of commission payments from any financial settlements the lawyers received from their private lawsuits.  

“Now twenty years later, greedy trial lawyers are making fortunes by abusing the flawed law while workers and businesses pay the price,” says Carl DeMaio, Chairman of Reform California.  

DeMaio says more than a third of all settlements under PAGA go directly to the lawyers when the funds should have gone entirely to workers.  

For example, recently Google was hit with a sue-and-settle PAGA lawsuit where the company agreed to a $1 million settlement to make the frivolous lawsuit go away. Of that settlement, the California state government received $488,000, the attorney $330,000, and each employee received a measly $15.

DeMaio also warns that the PAGA law is now being used in another shakedown scam where union bosses demand a small business sign a costly union contract. That latest scam was made possible by state politicians when they passed a PAGA amendment law in 2020 allowing unionized companies to be exempt from PAGA lawsuits.

That’s why the Fair Pay and Employer Accountability initiative would not only repeal PAGA, but would restore the role of the CA Labor Commission for enforcing labor law. Furthermore, the initiative gives businesses a period to correct violations without penalty and increase penalties for businesses who fail to do so.  

“We need to end the abuse of PAGA and the costly and frivolous lawsuits it has spawned that only line the pockets of trial attorneys and special interests at the expense of small businesses and workers,” DeMaio says.

“If we pass the Fair Pay and Employer Accountability, we stand a chance at reversing the destruction of jobs and businesses in California and setting the state back in the right direction of attracting business and making it possible to live here comfortably,” explained DeMaio.

DeMaio says the initiative has caught the attention of the State Legislature, and that it’s possible they might negotiate a compromise reform package. While waiting to see what that package might look like, in the meantime DeMaio and Reform California are fully backing the Fair Pay and Employer Accountability Initiative on the November ballot.

DeMaio urges all concerned California voters and small business owners to join the campaign to repeal PAGA and replace it with the Fair Pay and Employer Accountability Act in the November 2024 election.