Reforming PAGA to Protect Small Businesses – George Runner – July 20, 2021
By George Runner
Members of the California small business community are just getting back on their feet after the devastation caused by the coronavirus pandemic.
To achieve a full economic recovery, Sacramento lawmakers must come together to find ways to ease the regulatory burden that business owners face. A good place to start would be to reform the Private Attorneys General Act (PAGA) which has wreaked havoc on small businesses in California and, as a result, harmed consumers and employees.
PAGA’s original intention was to give aggrieved employees the opportunity to file claims against their employers for legitimate labor and wage violations and to recover appropriate compensation. When first enacted in 2003, PAGA seemed like a common sense way to solve a real problem. Everyone can agree that workers who can prove that they have suffered injury at work should be entitled to compensation.
Sadly, the law was drafted so broadly that it allowed our state’s legal system to be overrun with bogus claims from predatory trial attorneys who made a cottage industry of filing frivolous lawsuits.
These lawyers actively recruit clients to accuse their employers of wrongdoing by promising them a hefty salary if the court decides. This behavior is far from the original purpose of PAGA or “justice under the law”. Left unchecked, PAGA will continue to be a profit machine for wealthy lawyers while driving more small businesses out of the state.
The most egregious aspect of PAGA is the incentive it provides to litigators for vulnerable and muscular businesses to settle before trial. This tactic allows lawyers to target and impose significant regulations on small businesses that they know cannot afford a long legal battle. Instead of risking all of their livelihood to fight a minor violation in court, most business owners just pay the ransom just to get rid of the problem, even if they are innocent.
PAGA allows lawyers to initiate unnecessary lawsuits in bad faith, knowing full well that they have no record but can force a settlement anyway. How is this justice?
The woes of PAGA in California extend far beyond our courtrooms. Companies that rack up unnecessary legal fees to defend themselves against malicious claims are forced to pass higher prices on to consumers or lay off employees just to stay afloat. Over the past year, this issue has impacted all of our lives as the prices of everyday commodities continue to rise across the country.
The economic fallout caused by PAGA has been felt most by members of the working class communities in our state. When prices rise and small businesses suffer, low-income individuals and families are hit hardest. This brake on economic growth creates a vicious cycle of downward mobility.
According to a recent study by Citizens Against Lawsuit Abuse (CALA), if California lawmakers take concrete steps to clean up the epidemic of lawsuit abuse in our state, it could trigger 46 billion dollars in increased economic activity. This windfall would positively change the lives of millions of Californians.
As a former lawmaker, I know what it means to put aside political differences to achieve meaningful results for those who need them most. I call on our elected officials in Sacramento to reform the PAGA and mitigate the damage it is currently causing. The law should provide employees whose rights have been violated a means to collect damages, while protecting small businesses from abuse of lawsuits. These reforms will go a long way in restoring California’s position as a great place to do business.
George Runner is a businessman and former member of the State Equalization Council, State Senate, and State Assembly representing Santa Clarita.
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