A California Labor Law Is in Play – What It Does – CalMatters
A pending U.S. Supreme Court ruling could oust a California law that allows employees to collectively sue their employers for labor violations. Thousands of workers have used the law to resolve workplace issues, sometimes winning major settlements and changing company policies. But critics say the law primarily benefits private lawyers who bring lawsuits.
In the early 2000s, California lawmakers identified a problem: there were not enough investigators and state attorneys to pursue all potential violations of labor laws, such as minimum wage, overtime pay, etc.
So they passed a law allowing workers to sue their employers on behalf of the state, seeking penalties that until then had been the exclusive domain of a state employment agency. Essentially, he delegated workers to help enforce labor laws through private suits.
This law, called the Private Attorneys General Act, was challenged by a Southern California cruise line in a case recently heard by the United States Supreme Court. The specific question the court is expected to decide by June: Whether workers who have signed employment contracts barring them from suing their employers can still sue under the law.
It’s corny legal stuff – can you sue some type of lawsuit if you signed an employment contract with a certain clause about how disputes are settled?
But it has practical ramifications for a large portion of California workers.
Contracts that require workers and employers to settle their agreements through a private third party rather than going to court are called arbitration agreements. More than a third of non-union private workers in California are already required to resort to arbitration instead of going to court, according to a study by the left-leaning Institute for Economic Policy.
Employers tend to favor arbitration because it’s faster and cheaper than going to court. But a review of more than 1,000 arbitration decisions published in the Journal of Empirical Legal Studies found workers won in arbitration only 21% of the time, lower than their win rate in court. Generally, private arbitrators are paid by the employer.
The Supreme Court will decide whether workers who have signed arbitration agreements can still sue under the law or whether they must stick with the arbitration process.
Other states, including New York, Washington, Oregon and Vermont, have considered legislation similar to California’s law. The Maine Legislature passed a similar bill in 2021, but Maine Governor Janet Mills vetoed the measure.
So what do we know about how this law works?
Thousands of workers have used the law to fight labor rights violations
Every year, thousands of California workers file claims under the law, according to data from the state agency for Labor and Workforce Development. Most of these claims do not result in civil penalties, according to an analysis by the agency, which could be for a number of reasons, including whether workers and employers reach an agreement before going to trial.
Nearly nine in 10 claims allege wage theft, according to research by two advocacy groups and the UCLA Labor Center.
The law won victories for workers and changed company policies:
- In December 2021, video game publisher Riot Games agreed to a $100 million settlement to settle a sex discrimination lawsuit filed partly under the law. The video game maker, which created popular game League of Legends, will pay $80 million of the settlement to workers, of whom at least 2,300 are eligible, according to the Washington Post. As part of the agreement, the company will also increase transparency on compensation for job applicants, create 40 full-time positions for qualified candidates who previously worked for the company as contractors, and have a woman or a member of an underrepresented community on job boards.
- And in 2017, a group of West Coast Tomato Growers workers filed several complaints under the law, including alleged violations of meal and break laws, said Cynthia Rice, the workers’ lawyer in the case and director of litigation, advocacy and training. for California Rural Legal Assistance, which provides free civil legal services to low-income people. The resulting settlement required the company to adopt dozens of new policies, including informing workers of heat-related illness regulations, providing them with sufficient equipment for their jobs, hiring an ergonomics expert to reduce physical risks to workers in the field and in packing sheds, and more.
A worker’s ability to sue on behalf of other workers who have been similarly affected is a key part of the law, said Mariko Yoshihara, legislative counsel and policy director for the California Employment Lawyers Association, a organization of lawyers who represent workers. in labor disputes.
Employees tend not to want to accuse their current boss of wrongdoing. “There’s a huge fear of retaliation,” Yoshihara said, so a system that relies on workers to come forward one-by-one is less likely to catch violations than a system that allows one worker to carry. complaint on behalf of several.
Under a case-by-case approach, “there will always be an economic incentive to pay less, deny rights and rip off workers”, said Rice, with California Rural Legal Assistance.
The law also generated new revenue that the state government can use to enforce workplace laws. Where employers are required to pay civil penalties in litigation under the law, 25% of the penalty goes to the workers and the rest goes to the national employment agency. In 2019, sanctions brought in $88 million to the employment agency, according to the UCLA report.
Critics point to lack of oversight and poor settlement agreements
But business groups are critical of the law, saying state oversight of the process is extremely limited and the private lawyers who bring the cases reap the biggest profits.
“If they allow private attorneys to step into the shoes of the attorney general, there have to be checks and balances,” said Tom Manzo, president of the California Business and Industrial Alliance, a business organization of nearly 200 companies. dedicated to changing the law.
When a worker or their attorney notifies the state that they intend to file a civil lawsuit, the state labor agency generally has 30 days to review the notice and decide whether to investigate. the case itself. If he does not investigate, or if he investigates but does not penalize the employer, the worker can file a complaint in court.
A 2019 agency budget document provides a window into how the state reviews claims made under the law. Between the summer of 2017 and 2018 – the most recent year included in the document – the government was notified of 5,383 complaints.
A nine-person team reviewed 1,339 of the complaints and investigated 16 of them.
A much larger budget and a staff of 197 would “arguably adjust the right size” of the team, the authors of the budget document wrote, and would allow “a statistically relevant number of cases to be investigated each year.”
The team overseeing the law reviewed more than 1,500 settlement agreements and assessed the agreements on criteria of legality, fairness and robustness. They assigned marginal failing or passing grades to 75% of the settlements, “reflecting the failure of many private plaintiff attorneys to fully protect the interests of injured employees and the state,” according to a summary of the examination in the document.
On average, lawyers’ share of settlements under the law is about $406,000 and the average award per employee is about $2,000, according to an analysis of settlements conducted by two former agency heads. placement and paid by the Alliance. The report also found that workers received about $4,000 on average in the rare cases where the employment agency pursued cases itself, although payments went to fewer workers per case on average.
“It’s a law that makes lawyers rich, not employees,” said Len Welsh, former head of California’s Division of Occupational Safety and Health and one of the study’s authors.
“I think everyone would like all lawyers to work for free,” but that’s just not the reality, said Yoshihara of the Labor Lawyers Association. “If we want to incentivize attorneys to take on cases where there are workplace-wide violations, we need to award attorney fees.”
A ballot initiative backed by ongoing business groups that would repeal the law, create new penalties for labor law violations to be enforced by the Labor Department, and create a team to handle employer and worker questions on possible violations. It would also require the state to fund the office of the labor commissioner to fully carry out its functions. The measure is currently collecting signatures but has not yet qualified for the ballot.
If the Supreme Court rules that workers who sign arbitration agreements cannot sue under the Private Attorneys General Act, Dave Cortese, Democratic Senator from Campbell State and Chairman of the Senate Labor Committee, said he believed the Legislative Assembly would take action. . The Supreme Court may offer a roadmap of sorts in its ruling, pointing to alternative policies that would be legal.
“Once we receive these directions from the court, legislation will be crafted to align California law with the best worker protections we can offer,” Cortese said.