BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
SB 989 (Hollingsworth)
As Amended May 11, 2010
Hearing Date: June 29, 2010
Fiscal: No
Urgency: Yes
KB:jd
SUBJECT
Labor Code Private Attorney General Act of 2004
DESCRIPTION
This bill would require an employee requesting court approval of
the settlement of a civil action brought under the Labor Code
Private Attorney General Act to serve a copy of the court's
final approval order and settlement agreement to the Labor
Workforce Development Agency (LWDA) within 20 days after the
order is made and the settlement is final.
BACKGROUND
The Labor Code Private Attorney General Act (PAGA) was enacted
by SB 796 (Dunn, Chapter 906, Statutes of 2003) in response to
concerns about deficiencies in labor law enforcement.
Proponents of SB 796 argued that the PAGA would address
enforcement problems in two major ways. First, the PAGA
authorized civil penalties for violations of a large number of
Labor Code provisions, which previously only carried criminal
fines. Second, the PAGA authorized the filing of civil actions
to recover existing and new civil penalties by aggrieved workers
acting as private attorneys general. The PAGA was significantly
amended by SB 1809 (Dunn, Chapter 221, Statutes of 2004), which
enacted specified procedural and administrative requirements
that must be met prior to bringing a private action to recover
civil penalties. SB 1809 further expanded judicial review of
PAGA claims by requiring courts to review and approve any
penalties sought as part of a proposed settlement agreement, and
those portions of settlements concerning violations of health
and safety laws. In addition, courts were authorized to award a
(more)
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lesser amount if to do so otherwise would result in an award
that is unjust, arbitrary and oppressive, or confiscatory.
Finally, SB 1809 changed the prior penalty formula to provide
that 75 percent of most civil penalties recovered pursuant to
PAGA shall go to the LWDA for labor law enforcement and
education.
This bill seeks to additionally require an employee who has
obtained court approval of a settlement to a civil action
brought under the PAGA to provide a copy of the court's final
approval order and settlement agreement to the LWDA within 20
days after the order is made and the settlement is final.
CHANGES TO EXISTING LAW
Existing law provides that the Labor and Workforce Development
Agency (LWDA) and its various departments, divisions,
commissions, boards, agencies, or employees may assess and
collect penalties for violations of the Labor Code. (Lab. Code
Sec. 2698.)
Existing law , the Private Attorneys General Act of 2004 (PAGA),
allows aggrieved employees to bring civil actions to recover
penalties for violations of the Labor Code if the LWDA or its
departments, division, commissions, board, agencies, or
employees do not do so. Existing law establishes a civil
penalty where one is not specifically provided under the Labor
Code of $100 for each aggrieved employee per pay period for an
initial violation, and $200 for each aggrieved employee per pay
period for subsequent violations. The penalty is $500 per
violation where the violator does not employ any employees at
the time of the violation. (Lab. Code Sec. 2699.)
Existing law provides that the penalties collected in these
actions are distributed 75 percent to the agency (LWDA) to be
continuously appropriated for purposes of enforcement and
education of employers and employees about their rights and
responsibilities under the Labor Code and 25 percent to the
aggrieved employee, except that if the person does not employ
one or more persons, 100 percent of the penalties collected are
distributed to the agency by continuous appropriation. (Lab.
Code Sec. 2699.)
Existing law requires a court, in any action by an aggrieved
employee seeking recovery of a civil penalty pursuant to the
PAGA, to review and approve any penalties sought as part of a
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proposed settlement agreement. (Lab. Code Sec. 2699.) Existing
law also authorizes a court to award a lesser amount than the
maximum civil penalty amount allowed if to do otherwise would
result in an award that is unjust, arbitrary and oppressive, or
confiscatory. For occupational safety and health violations,
existing law requires that the provisions of a settlement be
submitted to the division (Division of Occupational Safety and
Health) at the same time that they are submitted to the court.
(Lab. Code Sec. 2699.3.)
This bill would require an employee requesting court approval of
the settlement of a civil action brought under the Labor Code
Private Attorney General Act to serve a copy of the court's
final approval order and settlement agreement to the LWDA within
20 days after the order is made and the settlement is final.
This bill would declare that it is to take effect immediately as
an urgency statute in order to address the existing economic
conditions in California by spurring new job creation.
COMMENT
1. Stated need for the bill
The author states:
Civil penalties sought under PAGA can be as high as $200 per
aggrieved employee per pay period. Under PAGA, awards of
penalties in civil actions are to be distributed between the
aggrieved employees and the Labor Workforce Development Agency
- 25% to the employees and 75% to the LWDA. The money
received by LWDA is intended for labor law enforcement and
education programs. [emphasis omitted] ? LWDA must expend its
own resources to go after attorneys that file PAGA cases but
refuse to pay LWDA its entitled penalties. On at least one
occasion, LWDA has had to bring suit against an attorney who
refused to distribute to LWDA its share of penalties.
Unfortunately, in some cases the cost to LWDA to litigate its
right to its share of penalties exceeds the potential
recovery, making such litigation impractical.
In order to uphold the educational and enforcement intent of
the PAGA, LWDA must be made aware of court approved PAGA
settlements. Having such necessary information will permit
LWDA to, among other things, identify problem industries with
high rates of non-compliance and will also help expose
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attorneys abusing the PAGA by filing lawsuits intended only to
garner high attorneys' fees and little in the way of penalties
for aggrieved employees.
2. Required notice to LWDA
SB 1809 (Dunn, Chapter 221, Statutes of 2004) significantly
amended the provisions of the PAGA by enacting specified
procedural and administrative requirements that must be met
prior to bringing a private action to recover civil penalties.
SB 1809 also expanded judicial review of PAGA claims by
requiring courts to review and approve any penalties sought as
part of a proposed settlement agreement, and those portions of
settlements concerning violations of health and safety laws. In
addition, courts were authorized to award a lesser amount if to
do so otherwise would result in an award that is unjust,
arbitrary and oppressive, or confiscatory. Finally, SB 1809
appropriated $150,000 from the General Fund to the LWDA for the
purposes of implementing its provisions, and changed the prior
penalty formula to provide that 75 percent of most civil
penalties recovered pursuant to PAGA shall go to the LWDA for
labor law enforcement and education.
According to the Senate Floor Analysis for SB 1809 (as amended
7/24/04), at the time SB 1809 was pending, the Labor Workforce
Development Agency reported that civil actions filed under the
PAGA had been settled out of court, where the civil penalty
distributions formulas did not apply. The LWDA had reportedly
only received a distribution of civil penalty revenues totaling
less than $100.
In 2006, the LWDA sponsored AB 2997 (Houston), which would have
required, among other things, the parties seeking court approval
of a settlement under the PAGA to serve the LWDA a notice of the
request not less than 20 calendar days prior to filing the
request with the court. In support of this measure, the LWDA
stated that it had only received a little more than $40,000 in
civil penalties since 2004 and that there were insufficient
provisions in law to ensure that the LWDA is notified of
decisions or settlements in PAGA cases. AB 2997 was ultimately
held in the Assembly Judiciary Committee.
This bill would require parties seeking court approval of a
settlement under PAGA to serve the LWDA with notice of the
approved settlement within 20 days of the date the order is made
and the settlement is final. This is intended to ensure that
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the LWDA has notice of any settlements of PAGA actions and
receives its share of the awarded civil penalties.
A previous version of this bill would have required the parties
to give LWDA notice of a request for court approval at least 20
days before filing for the request. This was similar to one of
the provisions in AB 2997. However, various stakeholders raised
concerns that the advanced notice requirement would increase the
obstacles plaintiffs must go through in order to reach a
settlement agreement, and enable the LWDA to veto settlement
agreements without actually participating in the discussions.
In response to these concerns, this bill was amended to instead
require notice to the LWDA after the settlement has been
approved by the court.
Support : California Association of Joint Powers Authorities;
California Chamber of Commerce; California Framing Contractors
Association; California Grocers Association; California Hospital
Association; California Independent Grocers Association;
California Manufacturers and Technology Association; California
Retailers Association; National Federation of Independent
Business
Opposition : None Known
HISTORY
Source : Author
Related Pending Legislation : None Known
Prior Legislation :
AB 2997 (Houston, 2006) would have required the parties seeking
court approval of a settlement under the PAGA to serve the LWDA
a notice of the request not less than 20 calendar days prior to
filing the request with the court. AB 2997 would have further
required a court to award the LWDA reasonable attorney's fees
and costs in any proceeding in which the LWDA is adjudged to be
entitled to penalties under the PAGA. This bill was held in the
Assembly Judiciary Committee.
SB 1809 (Dunn, Chapter 221, Statutes of 2004) significantly
amended the PAGA by enacting specified procedural and
administrative requirements that must be met prior to bringing a
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private action to recover penalties of Labor Code violations.
SB 796 (Dunn, Chapter 906, Statutes of 2003) enacted the Private
Attorneys General Act.
Prior Vote :
Senate Labor and Industrial Relations Committee (Ayes 6, Noes 0)
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