Santa Clara Law Review Volume 60 Number 2 Article 5 7-8-2020 HAS PAGA MET ITS FINAL MATCH? CONTINUED EXPANSION OF CALIFORNIA’S PRIVATE ATTORNEYS GENERAL ACT LEADS TO TRADE GROUP’S CONSTITUTIONAL CHALLENGE Muñoz, Ivan Follow this and additional works at: https://digitalcommons.law.scu.edu/lawreview Part of the Law Commons Recommended Citation Muñoz, Ivan, Case Note, HAS PAGA MET ITS FINAL MATCH? CONTINUED EXPANSION OF CALIFORNIA’S PRIVATE ATTORNEYS GENERAL ACT LEADS TO TRADE GROUP’S CONSTITUTIONAL CHALLENGE, 60 SANTA CLARA L. REV. 397 (2020). Available at: https://digitalcommons.law.scu.edu/lawreview/vol60/iss2/5 This Case Note is brought to you for free and open access by the Journals at Santa Clara Law Digital Commons. It has been accepted for inclusion in Santa Clara Law Review by an authorized editor of Santa Clara Law Digital Commons. For more information, please contact [email protected], [email protected]. HAS PAGA MET ITS FINAL MATCH? CONTINUED EXPANSION OF CALIFORNIA’S PRIVATE ATTORNEYS GENERAL ACT LEADS TO TRADE GROUP’S CONSTITUTIONAL CHALLENGE Ivan Muñoz* In 2003, California enacted the Private Attorneys General Act (“PAGA”) in response to its inability to enforce its labor code amid rapid expansion of its workforce. What was traditionally a responsibil- ity of the Attorney General, private plaintiffs could now sue their em- ployers for alleged violations of the labor code. The law was received with much controversy, and to this day, there are growing concerns that it has become an extortive mechanism for plaintiffs at the expense of the business community. This Note traces the historical development of the law by investi- gating its expansion in both the legislature and judiciary. Further, this Note uses CABIA v. Xavier Becerra, a case that alleges PAGA is uncon- stitutional both under state and federal law, as a framework by which to consider and analyze the law’s future. This Note proposes that there is a need for greater judicial oversight in PAGA lawsuits—particularly so in the settlement phase, where oftentimes plaintiff’s attorneys use PAGA claims as a tool to leverage large settlements. The current statutory re- quirement of court approval of PAGA settlements is insufficient and in need of greater scrutiny if California is to fulfill the legislative purpose that justified PAGA—greater protection for a growing workforce. * Editor-in-Chief, SANTA CLARA LAW REVIEW, Volume 60. J.D. Candidate, Santa Clara University School of Law, 2020. I am forever grateful for my friends and colleagues of SANTA CLARA LAW REVIEW. Special thanks to Jose Macias and Hector Rodriguez of Macias Rodriguez LLP, for mentoring me and being a source of inspiration. Lastly, I would like to thank Professor E. Gary Spitko, the entire faculty at Santa Clara Law and my family for their unconditional support. 397 398 SANTA CLARA LAW REVIEW [Vol:60 TABLE OF CONTENTS I. Introduction ................................................................................. 399 II. Historical Overview of PAGA .................................................... 401 A. California’s Labor Code Enforcement Problem Prior to PAGA............................................................................ 401 B. PAGA: From Bill to Enactment ........................................ 403 C. Support/Opposition to PAGA ........................................... 404 D. Repeal Efforts and Amendments ...................................... 404 1. Senate Bill 1809 (SB 1809) ........................................ 405 2. Recent reforms—Assembly Bill 1506 (AB 1506) and Senate Bill 836 (SB 836) .......................................... 406 3. Assembly Bill 1654 (AB 1654): Construction Industry Exempted from PAGA ............................................. 408 III. PAGA’s Expansion Through the Judiciary ................................. 408 A. An Aggrieved Employee Does Not Have to Satisfy Class Action Requirements as PAGA Is a “Representative Action” Raised as a Law Enforcement Mechanism (Arias v. Superior Court) ............................................................. 408 B. An Employee Cannot, Through a Pre-Employment Agreement, Waive the Right to Bring a PAGA Action, Because Such Agreements Violate Public Policy (Iskanian v. CLS Transportation Los Angeles, LLC) ...................... 410 C. An Employee May Seek Penalties for Labor Code Violations Without Suffering Harm (Huff v. Securitas Security Services USA, Inc.) ........................................................ 411 1. Employer Liability Expands ....................................... 413 2. Huff’s Potential Impact is Perhaps Limited ................. 414 IV. CABIA Business & Industrial Alliance v. Xavier Becerra ........... 415 A. CABIA files Complaint Alleging PAGA is Unconstitutional ...................................................................................... 415 B. Alleged Causes of Action—CABIA Asserts the PAGA Plaintiff Abuses Iskanian, and Often Serves Its Own Interest at the Expense of the State ................................. 416 C. Looking Forward—Potential Outcomes ............................ 420 1. If PAGA is Ruled Unconstitutional ............................ 420 a. Memorandum Provides Discussion of Repercussions That Would Occur if PAGA Were to Disappear . 420 b. A Substantial Loss of State Income....................... 421 c. Effect on Employers and Employees ..................... 422 2. If CABIA is Unsuccessful on Constitutionality Challenge ................................................................................ 423 V. Proposed Solutions ..................................................................... 423 A. Option 1: Settlement Proposal Review Hearing ................ 423 B. Option 2: Repeal PAGA ................................................... 424 C. Option 3: Employer/Employee Led Solutions ................... 425 1. Employer Solutions .................................................... 425 2. Employee Solutions ................................................... 427 VI. Conclusion ................................................................................ 427 2020] CA’S PAGA CHALLENGED ON CONSTITUTIONAL GROUNDS 399 I. INTRODUCTION In 2003, the California Legislature enacted the Private Attorneys General Act (“PAGA”), in response to the concern that the Labor and Workforce Development Agency (“LWDA”) was not properly enforc- ing the state labor code.1 The legislature believed the LWDA was re- stricted by budgetary constraints, low-staffing levels, and a growing workforce.2 To overcome these restrictions, the legislature deputized aggrieved employees to allow them to bring actions on behalf of the state.3 Through PAGA, California effectively authorized aggrieved em- ployees to act as private attorney generals to sue their employers to en- force the labor code.4 A PAGA action is a quasi-qui tam5 action provid- ing the state with 75% of the proceeds and 25% to the aggrieved employee.6 From its initial enactment to present-day construction, PAGA law- suits have grown at an exponential rate. During the first year when the law took effect, fiscal year 2004-2005, the state collected $20,900 in PAGA penalties.7 By fiscal year 2017-2018 that number rose to $34,640,059.8 Courts have consistently eroded employers’ ability to defend against PAGA litigation.9 The California judiciary has expanded the law’s scope through decisions such as Arias v. Superior Court,10 Is- kanian v. CLS Transportation Los Angeles, LLC,11 and Huff v. Securitas Security Services USA, Inc.12 Arias removes the class action requirement 1. Matthew J. Goodman, The Private Attorney General Act: How to Manage the Un- manageable, 56 SANTA CLARA L. REV. 413, 417-18 (2016). 2. Id. at 418. 3. Id. 4. Id. 5. Qui Tam Action, BLACK’S LAW DICTIONARY (11th ed. 2019) (defining a qui tam action as “[a]n action brought under a statute that allows a private person to sue for a penalty, part of which the government or some specified public institution will receive”). 6. See Goodman, supra note 1, at 418. 7. E-mail from the “DIR PAGAInfo,” to author (Jan. 15, 2019, 08:53 PST) (on file with author) [hereinafter 2019 DIR PAGAInfo Email]; see also infra Figure 1. This chart was pro- vided by the California Department of Industrial Relations. For more information, contact [email protected]. 8. See infra Figure 1. 9. But see ZB, N.A. v. Superior Court, 8 Cal. 5th 175, 198 (2019) (holding that a PAGA plaintiff is eligible to recover only a fixed penalty amount per pay period and does not include an unpaid wage claim under the California Labor Code section 558). 10. 46 Cal. 4th 969 (2009). 11. 59 Cal. 4th 348 (2014). 12. 23 Cal. App. 5th 745 (2018), reh’g denied (June 13, 2018), review denied (Aug. 8, 2018); see also Kim v. Reins Int’l California, Inc., 9 Cal. 5th 73 (2020) (holding that an em- ployee does not lose standing to pursue a PAGA claim after settling individual claims). 400 SANTA CLARA LAW REVIEW [Vol:60 for PAGA.13 Iskanian precludes a PAGA representative action from be- ing waived by a pre-employment agreement.14 Huff establishes that an employee aggrieved of at least one labor code violation may pursue any and all labor code violations committed by the employer, regardless of whether those additional violations harmed the plaintiff-employee.15 On November 28, 2018, however, the California Business & Indus- trial Alliance (“CABIA”), an organization advocating on behalf of the California business community, sued California Attorney General, Xa- vier Becerra, challenging PAGA’s constitutionality.16