Gov. Newsom Should Suspend PAGA Lawsuits Amid COVID-19 Crisis

The coronavirus might have shut down the economy, but California’s frivolous lawsuit profit mill remains alive and well. Fortunately, Gov. Gavin Newsom can protect our state’s already vulnerable businesses from falling prey to unscrupulous trial attorneys, at least while the COVID-19 crisis continues.

To protect customers and employees from further spreading this sometimes deadly virus, businesses across the state have been forced to alter their hours, lay off employees, and even shutter altogether. Meanwhile, trial attorneys have wasted no time targeting struggling employers. 

During just one week in March, 167 claims were filed under the Private Attorneys General Act (PAGA). Ramin Younessi, whose firm has filed the most PAGA lawsuits of any outfit in the last decade, has his name on more than 20 of these PAGA notices.

Of the 167 PAGA notices that went out, some were sent to Cedars-Sinai Medical Center, Altria Senior Living, and CareChoices Hospice and Palliative Services, Inc. That’s just a small sampling of the hospitals and hospice care centers targeted by PAGA, not to mention the restaurants and hospitality industries that are barely staying afloat.

While these businesses face one of the most difficult periods of economic upheaval in California’s history, many can now add an expensive legal battle to their list of woes. 

For those who don’t know, PAGA allows a disgruntled employee and his lawyer to step into the shoes of the attorney general to enforce labor law violations. Most PAGA violations equate to a typo on a pay stub or a late employee lunch break. However, the resulting lawsuit can leave businesses owing hundreds of thousands of dollars in settlement and legal fees. Rather than going to the employee, most of this money ends up in the pocket of the trial attorney bringing the case.

But how does a late lunch add up to millions? Penalties start at $200 for the first paycheck error and $100 for each check for any employee thereafter, going back four years. And that’s just for one violation; employers face additional penalties for having the wrong employee ID number on a pay stub, or for forgetting a hyphen in their business name.

Take Blaine Eastcott, owner of Rockreation Sports Climbing Centers in Los Angeles and Orange County. Blaine employed plenty of part-time college students at his rock climbing gym. As a result, he got hit with a PAGA suit for being too flexible of an employer. He recently settled his case for more than $300,000. Then, last week, he found out that he had to shut his business down due to the coronavirus mandate. Blaine already took out a loan to cover the PAGA settlement, and now needs another loan for his business to survive.

My organization, the California Business and Industrial Alliance (CABIA), has worked to expose how trial lawyers have profited from PAGA over the years. Recently, CABIA published an exposé on Class Action Plaintiff Finder, a company that promises to provide PAGA lawyers with plaintiffs in just three days’ time. We’ve also highlighted PAGA lawyer Daniel Gaines of Gaines & Gaines law, who has the audacity to drive around in a Rolls Royce bearing the license plate “MR PAGA.”

But despite our best efforts, it seems our political leaders still missed the memo on the legal scam PAGA has become. Now, trial attorneys have taken it too far.

Newsom’s response to the coronavirus has so far been outstanding, but there’s more he can do for vulnerable businesses. An executive order should be signed that would put a moratorium on PAGA lawsuits for the next 90 days. Our state’s businesses need all the financial relief they can get – especially those battling on the front lines of this public health crisis. Worrying about PAGA lawsuits is one thing California can, and should, remove from the equation.

Tom Manzo is the founder of the California Business and Industrial Alliance and the president of Timely Prefinished Steel Door Frames in Los Angeles.