Among the approximately 1,000 bills signed by California Governor Brown last month was Assembly Bill 1654 ("AB 1654"), which allows a class of employees to waive the remedies created by the Private Attorney General Act of 2004 (PAGA). As the number of PAGA lawsuits continues to increase in California, AB 1654 provides construction industry employers with an opportunity to resolve such disputes through entering into a collective bargaining agreement with a labor union.

PAGA authorizes employees to bring civil actions on behalf of themselves, other aggrieved employees, and the State of California, to collect civil penalties that otherwise would have been assessed and collected by the Labor and Workforce Development Agency (LWDA) for violations of certain provisions of the Labor Code.  PAGA requires the employee to follow prescribed procedures before bringing an action.  PAGA generally allocates 75% of the civil penalties recovered to the LWDA, for enforcement of labor laws and for education of employers and employees about their rights and responsibilities.  The remaining 25% is distributed to the aggrieved employees.  A plaintiff prevailing on a PAGA claim may also recover attorneys' fees.¹ The California Supreme Court has unequivocally held PAGA remedies are not waivable by private agreement.²

Echoing the concerns of many California employers that have been subjected to costly PAGA litigation, the bill's author, Assemblymember Blanca Rubio, commented:

PAGA was a well-intended law that gives workers the power to fight unscrupulous employers directly through the court system when the Labor Commissioner lacks the resources to enforce but it has, in many cases, become another form of litigation abuse by unscrupulous lawyers… There is a system already in place, for construction trades, Collective Bargaining Agreements (CBA), which can address legal and job site disputes in the construction trade industry.

The Consumer Attorneys of California (CAC) vehemently opposed the bill.  CAC claimed the bill would force employees "to rely on their unions—who specialize in collective bargaining and not California law and the rights it affords workers—to enforce their rights under PAGA."  CAC also argued the bill is "unconstitutional on its face" under the United States Supreme Court's opinion in Livadas v. Bradshaw (1994) 512 U.S. 107.³ Despite CAC's opposition, a supermajority of the Assembly and Senate voted in favor of the bill, and Governor Brown (who has been known to veto potentially unconstitutional legislation) approved it.

AB 1654 creates a new section of the labor code⁴ providing PAGA remedies are waivable, but only by "an employee in the construction industry" performing work under a CBA that meets specific requirements. 

An "employee in the construction industry” is broadly defined to include any employee "performing work associated with construction, including work involving alteration, demolition, building, excavation, renovation, remodeling, maintenance, improvement, repair work, and any other work as described by Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, and other similar or related occupations or trades."  The terms "maintenance" and "repair" are particularly broad, potentially covering employees not traditionally considered "construction" workers.

To validly waive an employee's PAGA remedies, the employer must negotiate with a labor union a collective bargaining agreement that meets meet all of the following requirements:

• Expressly provide for the wages, hours of work, and working conditions of employees;
• Provide for the employee to receive a regular hourly pay rate of not less than 30% more than the state minimum wage rate;
• Mandate premium wage rates for all overtime hours worked;
• Expressly waive the requirements of PAGA in clear and unambiguous terms;⁵ and
• Authorize the arbitrator to award any and all remedies otherwise available under the Labor Code, except "the award of penalties under [PAGA] that would be payable to the Labor and Workforce Development Agency."

A waiver of PAGA remedies "expire[s] on the date the collective bargaining agreement expires."  Accordingly, in the event the active CBA expires and a new CBA is not already in place, the waiver is no longer valid. 

AB 1654 will be automatically repealed on January 1, 2028, and any waiver provisions in effect pursuant to its terms will also expire on that date.

Construction industry employers covered by AB 1654 should consider whether to take advantage of the limited exceptions provided in the new law.