Google recently settled a lawsuit under the Private Attorneys General Act (PAGA) for a whopping $27 million. But it was an empty victory for the company’s aggrieved employees – who each received less than an $80 payout.
You don’t have to look much further for evidence that lawsuits filed under California’s misguided PAGA law have become little more than a cash cow for trial attorneys. This is far from the first time million-dollar settlements have left employees with little more than coal in their stocking – while attorneys reap the real monetary rewards.
For example, in Price v. Uber Technologies, Inc., the average Uber driver was awarded just $1.08, while the plaintiff’s attorneys were awarded over $2.3 million. And last year, Walmart settled a $5.9 million PAGA lawsuit that accused the company of not providing “suitable seating for cashiers.” In typical PAGA fashion, the actual aggrieved employees received substantially less than the millions that went to trial lawyers and the state.
Since PAGA’s inception in 2004, the number of lawsuits has skyrocketed by over 1,000 percent. This surge in litigation isn’t a reflection of a sudden uptick in labor law violations. It underscores a much more insidious problem wherein PAGA has incentivized the pursuit of frivolous claims for financial gain.
In the past six years alone, trial attorneys have amassed a staggering $8 billion through PAGA-related settlements—a figure that should raise eyebrows and prompt a critical examination of the law’s efficacy. The rapid growth in the number of lawsuits and the astronomical payouts to trial lawyers indicate that PAGA has created an environment ripe for legal exploitation.
In the past fiscal year, the average PAGA settlement cost for employers was nearly $4 million—a burden disproportionately shouldered by small businesses. These lawsuits place an undue burden on the limited resources of small enterprises, diverting funds away from business growth, employee benefits, and operational improvements.
Unlike large corporations with robust legal departments and ample resources, small businesses lack the financial buffer to weather the storm of exorbitant legal costs associated with PAGA litigation. The complex and time-consuming nature of PAGA lawsuits can also hinder the ability of small businesses to navigate the legal process effectively, leading to settlements that may seem like the path of least resistance, even in the absence of clear culpability.
PAGA lawsuits have cost the state’s economy billions of dollars. It is no wonder that at least 352 companies have moved their headquarters out of California since 2018 in search of hospitable business climates—taking thousands of jobs with them. These companies include Tesla, Oracle, Toyota, Nestle, and many more.
To address the PAGA conundrum, California must carefully reassess the law’s current structure and its unintended consequences. While it’s crucial to protect workers’ rights, the current environment encourages trial lawyers to exploit PAGA as a lucrative revenue stream rather than a tool for justice.
Striking a balance between holding businesses accountable for legitimate violations and preventing the abuse of the system is essential for fostering a fair and equitable business landscape.
Tom Manzo is the president and founder of the California Business and Industrial Alliance.
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