California bills would lower penalties for companies being sued by employees for labor violations

SACRAMENTO, Calif. (AP) - The California Legislature approved bills Thursday that would amend a 20-year-old law allowing workers to sue their bosses over labor violations and require employers found liable to pay a fine to the state.

The legislation would reform the Private Attorneys General Act, which took effect in 2004. It has come under scrutiny by business groups that say the law has been misused. Critics also say that litigating alleged violations under the law is often time-consuming and expensive.

The bills would lower the financial penalty for some employers and compel them to correct violations. They came out of a deal between Gov. Gavin Newsom, lawmakers, business groups and labor leaders to remove a ballot measure asking voters to repeal and replace the law.

Newsom, a Democrat, touted the deal in his State of the State address Tuesday, calling reforming the law a "complicated, thorny issue that for decades eluded compromise."

"We accomplished something that was seemingly impossible," he said. "It’s easier to address simple problems, but that’s not the California way."

Newsom has said he will sign the bills. They would then take effect immediately.

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The state Senate and Assembly passed the proposals without any lawmakers voting against them. One of the bills would give businesses with under 100 employees the right to correct violations and allow larger businesses to ask for an early evaluation of the alleged violation. The other bill would lower penalties for less serious violations of labor law and increase penalties for more serious ones.

Under the 2004 law, employers who have violated California’s labor code must pay a fine. A quarter of that money goes to workers and the rest to the Labor and Workforce Development Agency for worker safety law enforcement and education.

But under the new legislation, 35% of the money would go to affected workers. The original law also doesn’t allow employers to correct violations to avoid fines.

Debate over the 2004 law has raised questions about what the state does with the money it receives from businesses for fines and settlements involving violations. In 2022-2023, the state left $197 million of that money unspent, CalMatters reported earlier this month.

Democratic Assemblymember Ash Kalra, who authored one of the bills, said the deal "demonstrates how things should be done when all sides come together to resolve a longstanding issue of division."

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Ashley Hoffman, a policy advocate with the California Chamber of Commerce, said at a hearing this week on one of the bills that the original law was "well-intentioned" but has become "manipulated at the expense of workers, businesses and nonprofits that serve vulnerable Californians."

"What’s in this bill and its companion represent historic reform to address these concerns," Hoffman said, adding "California workers can feel confident that there is robust labor law enforcement."

The proposed ballot measure, which was backed by many business groups, would have repealed the 2004 law. It would have required that the state provide resources to employers to help them comply with labor laws; that only the labor commissioner can award workers civil penalties of at least $100 per pay period, with some exceptions; that employers have an opportunity to correct violations without penalties; and that employees receive 100% of the money from penalties imposed on employers, instead of 25%.

Sara Flocks, a campaign director at the California Labor Federation, said at a hearing this week that the original law, which is often called PAGA, came in "response to a crisis in labor law enforcement." The law was created to bolster rights for immigrant workers, low-wage workers, farmworkers and other vulnerable employees, she said.

"The two bills that we have negotiated with the chamber preserve PAGA as a unique enforcement tool while updating it to improve outcomes for workers and incentivize employer compliance with the law, which is our ultimate goal," Flocks said.

The deal follows a big year for labor in which Newsom signed laws to raise wages for fast-food and health care workers, increase paid sick days, and allow lower-level legislative staff to unionize.