Encouraging Labor Abuse Reports Beyond The PAGA Model

Encouraging Labor Abuse Reports Beyond The PAGA Model

When workers are underpaid, denied meal and rest breaks, or subjected to unsafe working conditions, there is a good chance nobody will ever know about it. Companies don't always realize they are violating labor laws, and the majority of employees are not fully aware of their rights.

Low-wage workers, in particular, may feel intimidated about reporting abuses. For these workers, as well as countless others, the risk of losing a job outweighs any potential benefit of filing a complaint with the employer or the state.

State agencies responsible for policing workplaces and penalizing violators are universally understaffed and under-resourced. For example, all too often it takes a catastrophic incident to shine a spotlight on a workplace safety violation. By then, it may be too late to help workers who would have benefited from the agency's intervention. For workers who haven't been paid proper wages, the spotlight will likely remain turned off until one of them files a successful claim.

It is therefore noteworthy that Virgin America and Alaska Airlines have recently been ordered to pay nearly $31 million to a class of flight attendants who weren't paid properly by the airlines.[1] The companies failed to pay the workers overtime, shortchanged them for meal and rest periods, neglected to provide accurate wage statements and owed significant waiting-time penalties.

As a result of the judgment, the flight attendants will be getting more than $3 million, but the airlines must also pay 75% of $12.3 million in penalties to the California Labor and Workforce Development Agency. This is all thanks to California's Private Attorneys General Act.[2]

Adopted in 2004, PAGA was designed to beef up enforcement of the state's labor laws by
deputizing employees to bring qui tam actions for the state when they saw violations of wage and hour, workplace safety and other laws designed to protect them.

Through PAGA, the state can also bring its own action against the employer, as it did in the airline case, but if it chooses not to do so, the employee can assert his or her own claim as well as a representative claim on behalf of fellow workers.

To incentivize employees to file these types of actions, PAGA plaintiffs retain 25% of any financial recovery, with the state receiving the remaining 75%. Plaintiffs' counsel are paid for their efforts out of the PAGA proceeds as well.

In recent years, other states, presumably with similar budget constraints, have seen the benefits of PAGA and moved toward enacting their own PAGA-like systems. Maine legislators
passed a PAGA-like bill in 2021, but it was vetoed by the governor.[3] Connecticut, Illinois,
Massachusetts, New Jersey, New York, Oregon, Vermont and Washington also considered similar legislation.[4]

Largely, these other laws would mirror California's PAGA, with some states expanding it to
include violations based on discrimination, protected leave and workplace safety laws.

Massachusetts and Washington even considered permitting the recovery of employees' wages if successful, potentially circumventing class certification requirements in class actions.

New York's Empowering People in Rights Enforcement Worker Protection Act, or EMPIRE Act, would have allowed employees, whistleblowers or organizations selected by the employee to initiate public enforcement on behalf of the state.[5]

New Jersey's law would have focused on promoting a what it called a fair workweek, establishing scheduling rules for large retailers, hotels, restaurants and warehouses, and
giving workers the right to sue on behalf of the state to enforce those rules.[6]

These state efforts appear to have stalled in the wake of the U.S. Supreme Court's 2022
ruling in Viking River Cruises v. Moriana.[7] In that decision, the Supreme Court ruled that
PAGA could not be used to bypass mandatory arbitration in employment agreements under
the Federal Arbitration Act.[8]  A plaintiff who submitted the individual portion of his or her
PAGA claim to arbitration, the court held, lacked standing to pursue a representative claim
on behalf of others in court.

Without the power of a group claim and its associated risk of a high payout, PAGA could
pose far less of a threat to employers and far less of an incentive for workers. But if workers
don't assert their rights, businesses have no reason to change their practices. Those that
unknowingly shortchange their workers will continue to do so, while knowing violators will
feel free to act with impunity.

The Supreme Court did not entirely shut the door on representative claims by individual
PAGA plaintiffs. It invited California's highest court to weigh in on whether an employee who
brings a PAGA claim in arbitration is barred from also bringing a representative PAGA action
in court. The Supreme Court of the State of California will make just such a determination
later this year in Adolph v. Uber Technologies Inc.[9]

In the meantime, however, the PAGA model still provides a framework for states that want
to prosecute labor code violations. The Viking River decision was focused solely on the
sanctity of arbitration agreements, not the underlying merits of the law. California
employees are still empowered to bring individual PAGA claims on the state's behalf, and
they may yet be able to pursue claims for the benefit of a larger group.

Whether or not California's court ultimately upholds the right of an employee to bring a
representative claim on behalf of other workers, PAGA puts violators on the state's radar
screen. All states rely on overworked and underfunded agencies to catch and correct wage
and hour violations and other serious workplace issues.

PAGA has provided an effective mechanism for workers to take action, but it may not be the
only vehicle for doing this.

A favorable verdict against a flagrant violator, even in a non-PAGA state, can still provide
state regulators with sufficient notice and ammunition to prosecute and fine the employer.
Plaintiffs in these cases, as well as counsel, can be awarded a finder's fee if the state
successfully prosecutes the employer as a result of their claims. Workers would thus have
additional incentive to assert claims, while the state would realize revenue from penalties
assessed against the businesses.

These might not be qui tam actions brought on behalf of the state, but they could
nevertheless benefit the state's enforcement mechanism, as well as its coffers. Individual
plaintiffs would be drawing regulators' attention to violations that otherwise might have
gone unnoticed and unprosecuted.

In a class action, the named plaintiff — entitled to a premium — would be further rewarded
for taking the lead against the recalcitrant employer. Claims that are decided for the plaintiff
in arbitration should be reportable to state agencies, regardless of confidentiality provisions
in arbitration agreements.

For employers, any judgment in favor of workers should prompt a thorough and detailed
investigation of work practices. A company that learns of wage and hour violations against
one employee should be on notice that it will be subject to a regulatory audit. The sooner it
takes steps to correct deficiencies and compensate workers, the better its chances of
escaping penalties.

PAGA may no longer be the lodestar for states seeking to address labor code violations, but
it paves the way toward other mechanisms for correcting wage and hour, safety and other
workplace abuses.

When workers are rewarded for successfully asserting claims and state regulators have the
tools they need to prosecute violators, employers will have both incentive and strong
reasons to treat their employees fairly.

Joseph Jeziorkowski is a partner at Valiant Law.

The opinions expressed are those of the author(s) and do not necessarily reflect the views
of their employer, its clients, or Portfolio Media Inc., or any of its or their respective
affiliates. This article is for general information purposes and is not intended to be and
should not be taken as legal advice.

[1] https://www.law360.com/articles/1569126/virgin-alaska-to-pay-nearly-31m-toattendants-
[2] http://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=LAB&division=
[3] https://capitolinsider.calchamber.com/2021/07/maine-governor-vetoes-paga-bill/.
[4] https://www.law360.com/employment-authority/articles/1410318/paga-like-effortsexpected-
to-continue-despite-maine-veto; https://www.jdsupra.com/legalnews/paga-painssoon-
[5] https://www.nysenate.gov/legislation/bills/2021/A5876.
[6] https://aboutblaw.com/XvA.
[7] https://www.supremecourt.gov/opinions/21pdf/20-1573_8p6h.pdf.
[8] https://uscode.house.gov/view.xhtml?path=/prelim@title9/chapter1&edition=prelim.
[9] https://casetext.com/case/adolph-v-uber-techs.