Deal reached on PAGA reform

Gov. Gavin Newsom and labor and business groups reached an agreement on reforms to California's Private Attorney General Act.

Multiple parties issued nearly simultaneous announcements shortly before noon on Tuesday.

The deal should beat a June 27 deadline to avert a costly ballot initiative campaign. It also gives business groups long-sought reforms like limiting how long workers can file claims, caps on damages, and increasing the percentage of payouts that go to workers instead of plaintiffs' attorneys.

"We came to the table and hammered out a deal that works for both businesses and workers, and it will bring needed improvements to this system. This proposal maintains strong protections for workers, provides incentives for businesses to comply with labor laws and reduces litigation," Newsom said in a statement.

Jennifer Barrera, president & CEO of California Chamber of Commerce, said "This package provides meaningful reforms that ensure workers continue to have a strong vehicle to get labor claims resolved, while also limiting the frivolous litigation that has cost employers billions without benefiting workers."

"This package provides meaningful reforms that ensure workers continue to have a strong vehicle to get labor claims resolved, while also limiting the frivolous litigation that has cost employers billions without benefiting workers," Jennifer Barrera, president & CEO, California Chamber of Commerce, said in a news release.

The agreement must still be signed off by the Legislature. Bill language must be in print by June 24 for lawmakers to vote on it in time to meet the deadline to remove the initiative from the ballot.

Newsom's office did not immediately respond to a request to share draft bill language. According to a source speaking on background, the office of the Legislative Counsel is reviewing the bill language.

The law allows workers to sue to enforce state labor laws; the name "private attorney general" signifies that plaintiffs are essentially allowed to step in to enforce state labor laws. The statute has been popular among workers and the plaintiffs' bar because it allows them to sidestep mandatory arbitration agreements. A series of recent court cases have reinforced the understanding that companies cannot escape PAGA cases by claiming preemption under the Federal Arbitration Act.

A coalition of business groups led by the Chamber have qualified a ballot initiative that would repeal the state's PAGA law, which went into effect in 2004. According to polling data shared by the Fix PAGA coalition, a legislative effort that works closely with the initiative campaign, Democrats, Republicans and independents all favor reforming the law.

The deal allows labor groups to keep the law in place while making concessions to reduce its misuse.

Lorena Gonzalez, principal officer of the California Labor Federation, AFL-CIO, said in a news release, "We are happy to have negotiated reforms to PAGA that better ensure abusive practices by employers are cured and that workers are made whole, quicker. PAGA is an essential tool to help workers hold corporations accountable for widespread wage theft, safety violations, and misclassification."

According to information release by parties close to the deal, the legislation will cap damages against employers who "act responsibly" and work to correct labor abuses, while allowing higher penalties against "employers who act maliciously." The amended law will also give increased "right to cure" protections for small employers, and require that 35% of payouts go to employees, up from the current 25%. Employees will only be able to sue for wrongdoing they personally experienced.

Senate President pro Tempore Mike McGuire, D-North Coast, called the agreement "critical to the long-term success of workers and businesses."

"Commonsense reform of PAGA has been discussed for years, and thanks to the collaboration of all sides, including the work of the Governor, this agreement will continue to provide strong worker protections and implement long talked-about reforms," McGuire continued.

Speaker of the Assembly Robert Rivas, D-Salinas, said he believes the deal will protect "working people, who are the real engine behind California's economic strength."

"It also recognizes companies that follow labor laws, and it puts more muscle into enforcement. I grew up watching farmworkers and employers find common ground, so it means a lot to me that so many groups came together and found consensus. This is a hard-earned agreement, and that makes the positive outcomes we'll see for businesses and workers even better," Rivas continued.