What do you get when you combine a business-backed ballot initiative, the state legislature and governor’s office, and labor organizations? A deal. California style.

By now you have heard of the deal to reform the California Private Attorneys General Act of 2004 (PAGA). PAGA is the one-of-a kind California law that allows employees to “step into the shoes of the government” and sue their employer on behalf of themselves and other employees to recover substantial penalties and attorney’s fees for labor code violations. In recent years, PAGA lawsuits have come to dominate the employment law litigation landscape in California.

In response, a coalition of businesses and advocacy groups collected sufficient signatures to qualify an initiative on the ballot to reform PAGA, initially called the “Fair Pay and Employer Accountability Initiative.” The initiative would have placed PAGA enforcement back in the hands of the government (the Labor and Workforce Development Agency, or LWDA) and out of the hands of private attorneys. In an effort to fashion a deal, the legislature, governor’s office and labor organizations worked with the proponents of the ballot initiative to craft a compromise. And “new PAGA” was born. 

What’s “new PAGA?” Distilled to its basics, the “new PAGA” legislation places caps on statutory penalties against businesses, allows more opportunities to cure alleged labor code violations, provides for an early neutral evaluation process in court after a lawsuit is filed for larger businesses (100+ employees), gives more of the recovery to plaintiffs (35% instead of 25%) and permits small businesses (under 100 employees) to participate in a pre-litigation evaluation and settlement process with the LWDA. The new law also expands available PAGA remedies to include injunctive relief. Finally, the reform bill toughens the standing requirements to require that the employee named in the PAGA letter actually experience the harm complained of in the initial filing with the LWDA. That is a reversal of the more permissive rule which allowed an employee suffering one violation to assert in their PAGA letter any violation any employee allegedly experienced.

In the past, business groups have managed to have legislation introduced that would have made changes to PAGA, but the bills never gained any traction. It was not until an initiative was about to be put in front of the voters this fall that any reform was seriously negotiated. Here’s what’s not new—this system of negotiation. For example, this same approach was used last year to finalize the new California fast food worker minimum wage law. As reported here, a similar deal was reached in which an employer-sponsored ballot initiative was withdrawn as part of a larger compromise. As with the recent PAGA reform agreement, the final arrangement was reached only after business interests qualified a measure for the ballot. 

The trend of placing an initiative on the ballot in order to obtain leverage to negotiate on a particular issue is certainly not new, but it seems to be becoming a more regular way of policy making. Other initiatives involving non-employment law topics have also been qualified, and then removed from the ballot, as part of larger compromises. The certainty of a legislative solution may outweigh the risks involved in the uncertainties presented by the vehicle of a ballot measure. But of course there are pros and cons to any vehicle used to attempt broad policy changes.

It seems certain that this trend – qualifying a ballot initiative and using it as a bargaining chip in a broader set of negotiations – is here to stay.  Time will tell whether it again is used as part of a larger process to formulate future employment law policy in the Golden State.

In the meantime, Littler’s Wage and Hour and Class Action practice groups has published a more detailed analysis of the substantive changes in PAGA resulting from the recent reform.