California Legislature and Governor Approve New PAGA Exclusion | Sheppard Mullin Richter & Hampton LLP
On September 27, 2021, California Governor Gavin Newsom signed Senate Bill 646 (“SB 646”), which creates a limited exception to the Private Attorneys General Act of 2004 (“PAGA”) for certain janitorial employees performing work under a collective agreement. (“ABC”). SB 646 will come into effect on January 1, 2022.
Private Attorneys General Act, 2004
PAGA appoints an “aggrieved employee” as a private attorney general to sue employers for alleged violations of the California Labor Code on their behalf and on behalf of other “aggrieved employees.” SB 646 excludes janitorial employees covered under a CBA who meet the requirements of the bill from filing a lawsuit against their employer under the PAGA. This exclusion is important because PAGA claims are generally very costly for employers to defend. The default civil penalties under the PAGA are $ 100 for each aggrieved employee per pay period for the initial violation, and $ 200 per aggrieved employer, per pay period, for each subsequent violation. Violations that arguably do not harm an employee economically, such as not including an employee’s identification number on a payroll, can result in potentially costly exposure for an employer to millions of dollars. dollars in penalties. Other costly features of PAGA include unilateral attorney fees provisions whereby successful employers in a PAGA lawsuit may not recover attorneys’ fees, even if the lawsuit is completely without merit.
Additionally, the California Supreme Court has ruled that an aggrieved employee who brings a representative action under PAGA can recover civil penalties without meeting class action certification requirements. Finally, as it stands, PAGA’s claims cannot be submitted to arbitration because the California Supreme Court has ruled that arbitration agreements that waive the right to bring PAGA action in no any forum were inapplicable. Based on the above, PAGA claimant employees and the lawyers representing them have been more aggressive in presenting these claims. As of January 2021, PAGA advisories have increased by more than 1,000% since the law came into force in 2004, and this number is estimated to continue to increase significantly.
The adoption of SB 646 is only the second time in PAGA history in which an exemption has been created for a certain industry. In 2019, AB 1654 was passed, which exempted construction workers in the construction industry. SB 646, likewise, specifically excludes janitorial employees represented by a trade union organization that represented janitors prior to January 1, 2021, and also employed by a janitorial contractor who has registered as an employer of real estate services in 2020. The rationale for its adoption was to “level the playing field for responsible contractors and their workers …”
For the exception to apply, janitorial employees must be covered by a collective agreement in effect before July 1, 2028, which expressly provides for the wages, hours of work and working conditions of employees, and provides for rates increased wages for all overtime worked. . The ACA should also include the following:
- Requires the employer to pay all non-intern workers working on certain sites full hourly compensation, including wages, health insurance, retirement, training, vacation, time off and benefit funds, amounting to no less than 30 percent of the state’s minimum wage rate.
- Prohibits violations of the Labor Code that can be remedied by PAGA; provides a binding grievance and arbitration process to remedy these violations, and allows the union to file a grievance on behalf of all affected employees.
- Expressly waives the requirements of PAGA in clear and unambiguous terms.
- Authorizes the arbitrator to grant all remedies otherwise available under the Labor Code.
SB 646 defines “janitorial workers” as an employee whose primary duties are to clean and maintain in good repair commercial work areas and washrooms, or office space, of a multi-unit residential establishment , an industrial establishment, a health establishment, an amusement park, a convention center, stadium, racetrack, arena or retail establishment.
However, the following “janitorial employees” are not included in the bill:
- Workers specializing in window cleaning
- Housekeeping staff who make beds and change sheets as primary responsibility
- Workers working in airport facilities or cleaning cabins
- Workers in hotels, card clubs, restaurants or other catering operations
- Grocery store workers and drug retail workers
A janitorial contractor who has entered into a collective agreement that meets the requirements of SB 646 must, within 60 days of entering into the agreement, submit certain information to the Workforce Development Agency (e.g. , the name of the janitorial contractor, the name of the work organization, the number of employees covered by the ABC and the duration of the agreement).
Some notable caveats are that SB 646 does not apply to PAGA lawsuits brought by covered “janitorial employees” before the end of 2021. The exception under SB 646 also expires upon expiration of the CBA or until July 1, 2028, depending on the date selected. earlier. Covered employers should take note of these deadlines when negotiating their collective agreements.
Although SB 646 only covers real estate service industries and janitorial workers, passing the bill with AB 1654 increases the potential for other industries and employers to seek similar exemptions from PAGA. With the potential adoption of more exemptions similar to SB 646 and AB 1654, the validity of the California Supreme Court ruling that PAGA’s claims cannot be waived by private arbitration agreements may be called into question. question and be subject to legal challenge.
Employers covered under SB 646 should assess their current collective agreements and seek to take advantage of the exemption, including negotiating any new agreements.