PAGA Reform is Needed Now More Than Ever

California’s anti-business climate is epitomized by abuse of the Private Attorneys General Act, or PAGA. This loophole enables claims over often easy-to-fix labor infractions, enriching opportunistic lawyers at employers’ and taxpayers’ expense. PAGA suits are also frequently used against nonprofits, charities, and regional centers that care for people with disabilities.

The Private Attorneys General Act of 2004 allows an employee to sue an employer on behalf of the state for California Labor Code violations. Rather than waiting for the Labor Commissioner to investigate, an employee can step into the state’s shoes and seek civil penalties.

Since the enactment of the Lanterman Developmental Disabilities Services Act in 1977, the state, through the Department of Developmental Services (DDS), has accepted responsibility for caring for individuals with intellectual and developmental disabilities (IDD). The state contracts with 21 nonprofit regional centers, which receive taxpayer dollars to provide diagnoses, coordinate services, and support for individuals with cerebral palsy, epilepsy, Down syndrome, and autism. As of August 3, 2026, 540,868 Californians had received services through the regional center system this year.

Despite decades of chronic underfunding, regional centers and other nonprofits have become preferred targets for plaintiff attorneys seeking quick profits through PAGA litigation.

Unlike for-profit businesses, nonprofits and regional centers often cannot raise funds to offset lawsuits. Donations, grants, and program funding may instead be redirected to legal defense or settlements. Their thin administrative budgets often mean limited HR staff, outsourced payroll, volunteer managers, and little legal resources. These constraints can increase technical Labor Code violations and discourage hiring hourly employees because of complex wage-and-hour laws used to support PAGA claims.

For example, Goodwill of Silicon Valley spent years defending a PAGA and employment lawsuit filed in 2018, which remained in litigation for roughly seven years before settlement proceedings. Similarly, the South Central Los Angeles Regional Center agreed to a $4.9 million settlement resolving class-action and PAGA claims alleging Labor Code violations.

In 2024, AB 2288 and SB 92 reformed PAGA by capping certain penalties at 15 percent, expanding the cure process, narrowing criteria for employees seeking to litigate, and making other changes. Yet this litigation remains common: legal defense costs are high, employers are forced to settle to avoid risk, and California remains an outlier anti-business environment compared with other states.

The California Behavioral Health Association (CBHA), which has 95 member organizations statewide, has also borne the brunt of PAGA lawsuits. Thirty-six member organizations have faced filings. Over the last six years, 118 notices were filed against CBHA providers, with 21 settlements totaling nearly $27 million in fines. Despite the 2024 reforms, the 15 California-based law groups that most frequently file PAGA cases against social-service providers have increased filing rates, with overall cases increasing nearly 20 percent.

PAGA lawsuits often characterize minor paperwork issues as “wage theft,” even when employees were fully paid. Wrong date formats on wage statements, missing employer addresses, payroll coding errors, paycheck-stub language, or meal-break documentation errors can support multimillion-dollar lawsuits. Penalties are often multiplied per employee for maximum impact.

PAGA claims also do not have to meet the same requirements as class actions, making them easier to file. The result can be six-figure legal bills, years of litigation, payroll audits, operational disruption, and insurance complications. For small businesses, regional centers, and nonprofits, these proceedings can be financially devastating and threaten the viability of their very social service mission.

Each year, taxpayer dollars intended to help disabled Californians are siphoned to plaintiff attorneys through frivolous PAGA suits. For years, the Legislature has failed to protect regional centers and disabled Californians through incomplete reforms, deference to plaintiff attorneys and rejection of meaningful legislation. This year, I attempted to introduce legislation limiting plaintiff attorney fees to 10 percent in cases involving tax-exempt nonprofits, but the amendments were rejected and the bill was denied a committee hearing.

It is a travesty that the care, safety, and well-being of more than half a million functionally disabled Californians served by the highly regarded state regional center system are jeopardized by a very small number of predatory plaintiff attorneys—and that Sacramento looks the other way.