Business Community Launches Private Attorneys General Act Reform Ballot Measure

On October 5, 2021, three major business trade associations, filed a new initiative measure with the Attorney General’s Office for title and summary, the first official step in their effort to place on the November 2022 statewide ballot changes to California’s Private Attorneys General Act (PAGA). The California Chamber of Commerce, California New Car Dealers Association, and Western Growers Association filed the measure, which essentially repeals the PAGA statutes and inserts new language.

Section One of the ballot measure would amend Part 13 of Division 2 of the Labor Code, commencing with Section 2698, which is the PAGA statute. First, it would strike PAGA as the title of this Part of the Labor Code and instead Part 13 would be titled “the Labor Code Fair Pay and Employer Accountability Act of 2022.”

Second, the measure would set forth four findings and declarations by the People (who would enact these statutory changes if this measure is placed on the ballot and passed by a majority vote of the electors). The first finding is that most employers comply full with the labor laws, but some companies do disregard their legal obligations. The second finding is that the State must reform the system so that employees owed monies are paid quickly.

The third finding is that employers who cheat workers should be held accountable, but that small businesses that comply with the law should be protected from frivolous lawsuits. The fourth finding is that enforcement of existing laws should not depend on our overburdened courts, but rather a process that does not require the employee to hire an attorney nor go into court to recover what is properly due to them

Third, the measure would provide an extensive statement of purpose, which is fundamentally to further protect workers from violations of the Labor Code. Here, the purpose is to change existing law to provide better results for workers without having to use an attorney; ensure that state regulators enforce the laws so that workers get paid with filing a lawsuit; focus on “bad actor” employers by doubling penalties for businesses that willfully violate the law; changing existing law that awards only 25% of penalties to the employee; and, provide resources to employers to assist in complying with the state’s complex labor and employment laws.

Fourth, the measure would specify that, for all violations of the Labor Code, with certain exceptions, that are enforceable by the Labor Commissioner, then the Commissioner can award a civil penalty of $100 per pay period to the aggrieved employee for an initial violation and $200 per pay period for each subsequent violation.

However, for all willful violations of the Labor Code, the Labor Commissioner may award double these amounts. The term “willful” is defined as the employer knowing that the act or omission violated the law and either intentionally failed to comply or failed to take any reasonable action to comply with the law. All of these penalties that are assessed are to be distributed to the aggrieved employee.

Fifth, the measure would provide that the Division of Labor Standards Enforcement must be a part to any employee complaint that is filed with the Labor Commissioner. And, an arbitration agreement does not have any effect on any complaint filed by an employee with the Labor Commissioner.

Sixth, the measure would require the Legislature to ensure that all necessary funding is provided to the DLSE in order to meet all of the DLSE’s mandates under the Labor Code.

Seventh, the measure would prohibit attorneys’ fees from being awarded in any action under Part 13, including any hearing before the Labor Commissioner, with specified exceptions.

Eighth, the measure would require the DLSE to create and maintain a “Consultation and Policy Publication Unit” for the purpose of providing information, advice, and assistance to employers, employees, and the public regarding the laws enforced by the DLSE. Any employee complaints to the CPPU must be redirected to the enforcement unit of the DLSE. This new CPPU would have sole responsibility at DLSE to maintain and keep current information on the DLSE website to clarify how the DLSE interprets and enforces the laws.

Ninth, the measure would ensure that an employer that is not subject to a pending DLSE enforcement action is entitled to request a confidential consultation with the CPPU and employers would have the opportunity to correct, without any penalty, any violations revealed pursuant to this consultation. In addition, the consultation’s findings are to be recorded in a confidential written report and be binding on the DLSE, unless at a later date the report is withdraw or amended.

Tenth, the measure would specify that, if the report identifies any violations, then those violations must be corrected within a reasonable time frame, but no more than 60 days. Moreover, an employer may request in writing that the CPPU issue a compliance advice letter to answer questions about how the employer is to comply with a statute or regulation enforced by the DLSE. Thereafter, the DLSE must issue such a compliance advice letter within three months of the written request.

Eleventh, the measure would provide that every compliance advice letter must be published on the DLSE’s website and is binding on the DLSE unless it is later withdrawn or amended. The DLSE cannot enforce a changed advice letter for thirty days, and the DLSE must continue to comply with the Administrative Procedure Act.

Twelfth, the measure would require an ombudsperson to be housed within the Department of Industrial Relations, and this person reports to the DIR director. The DLSE is prohibited from contracting with any non-governmental entity or attorney to pursue any claim or legal action against an employer on behalf of the DLSE. No investigatory information can be publicly disclosed until the investigation has been concluded and a decision has been made by the DLSE.

Thirteenth, the measure would provide that all funds received by the Labor and Workforce Development Agency pursuant to the PAGA statute be redirected to the Labor Enforcement and Compliance Fund.

Fourteenth, the measure would amend existing law related to the Labor Commissioner’s Field Enforcement Unit to ensure the FEU maximizes efficiency, effectiveness, and timeliness of enforcement of labor laws. Moreover, the Labor Commissioner would have additional requirements for its enforcement plan, including reviewing compliance for those targeted for enforcement. And identifying changes to be made to the plan to improve it.

Fifteenth, the measure would amend existing law to allow the DLSE to provide notice with a subpoena duces tecum (to produce documents) of reasonable assumptions that will be made about the information sought. These assumptions are binding unless specified conditions are met.

Sixteenth, the measure would require, by March 1, 2022 and annually thereafter, that the DLSE submit a report to the Department of Finance and the Legislature’s budget and policy committees containing certain required information.

Seventeenth, the measure contains a severability clause. And, finally, the measure states that this initiative is to be liberally construed by the courts in order to promote its purposes, and that the Legislature cannot amend this statutory language unless a bill is passed by ¾ vote of both houses of the Legislature and that furthers the purposes of this act.