The Private Attorneys General Act (PAGA) authorizes individual employees to file lawsuits to recover civil penalties on behalf of the state of California, themselves, and any other aggrieved employees for possible Labor Code Violations.

However, it has become like the bounty hunter law. The plaintiff's bar has turned it into a real money-making scheme because it triggers a right to recover attorney's fees.

Some employers seek to include PAGA waivers in their arbitration agreements, but PAGA representatives claim it is unlawful under California law. So there have been multiple petitions to the U.S. Supreme court to evaluate whether the Federal Arbitration Act preempts this California prohibition against PAGA waivers. All eyes on that one.

Nevertheless, there's another employment law issue in California. A new law prohibits employers from mandating arbitration agreements as a condition of employment or continued employment. What does this mean for employers with many non-exempt employees in California? How do they go around this hurdle for employees to sign these all-important arbitration agreements?

In this BR @ Work podcast episode, host William Anthony sits down with Partners at Blank Rome LLP, Caroline Donelan, and Natalie Alameddine. They discuss the shifting world of labor and employment law in California, especially the PAGA, issues around arbitration agreements, the forthcoming vote for the Fair Pay and Employer Accountability Act, what every multi-state employer should be thinking about, and more. 

🎙️ Meet Your Host 🎙️

Name: William J. Anthony

What he does: As a Partner at Blank Rome, Will’s labor and employment practice focuses on class, collective, and multi-party actions. He also provides training on management skills, discrimination, harassment, and other labor topics nationwide.

Company: Blank Rome LLP 

Words of wisdom: “In my three decades of practicing employment law and representing employers in workplace issues, I have noticed that new laws, social movements, and job loss are really the drivers of unrest in the workplace and claims being made about that unrest.”

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🎙️ Featured Guests 🎙️

Name: Caroline Donelan

What she does: As a trusted adviser and strategic partner to both domestic and foreign clients, Caroline provides advice and defense counsel in all areas of employment law compliance and litigation, including wage and hour class and representative (“PAGA”) actions, wrongful termination/retaliation, discrimination, harassment, trade secret disputes, data protection, and alleged fiduciary breaches.

Company: Blank Rome LLP

Words of wisdom: “When I talk to my clients that are human resource professionals, I say, when they're making tough decisions, I say put the human back in that human resources. I think kindness is king. That applies to my professional advice to employers..”

Connect: LinkedIn

Name: Natalie Alameddine

What she does: Natalie Alameddine concentrates her practice on labor and employment law, where she defends employers in single-plaintiff and class action employment matters. She also represents and counsels employers in a wide range of labor and employment matters. 

Company: Blank Rome LLP

Words of wisdom: “ The quote "wherever you go, no matter what the weather always brings your own sunshine" is kind of a reminder that we can do small little impacts of positive things throughout the day to bring that sunshine in other ways.”

Connect: LinkedIn

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The insights and views presented in BR @ Work are for general information purposes only and should not be taken as legal advice for any individual case or situation. The information presented is not a substitute for consulting with an attorney, nor does tuning in to this podcast constitute an attorney-client relationship of any kind.

From Blank Rome, you are listening to BR @ Work, the labor and employment podcast for in-house counsel and HR executives. We invite you to join us as we explore relevant topics at the intersection of law, business and current events to help you answer questions, solve problems, defend claims, and attract and retain a talented, engaged workforce. Let's get to work.

Hello and welcome to BR @ Work, a podcast focused on helping organizations get the most out of their workforces by providing thoughtful, strategic and compliance strategies. My name is Will Anthony and I'm a partner with Blank Rome and I'm joined by two of my California partners, Caroline Donelan and Natalie Alameddine. Welcome to our podcast.

Thank you for having us.

Of course. In this podcast, we like to explore timely workplace issues of interest, in-house counsel, human resources professionals and executives. And while none of this is intended to provide legal advice on your particular issues, we hope that you're going to find all of this information very helpful. As always, we want to know what's on your mind and what you're interested in hearing about and we'd love to have you join us. So feel free to reach out to me at william.anthony@blankrome.com with any of your thoughts on topics and your willingness to present on one of our podcasts. So Caroline and Natalie, I think as you both know I started my legal career in California and it got really much more difficult than I signed up for so I left. But you two have [crosstalk 00:01:40].

... of the Golden State.

Exactly. It was supposed to be a pretty simple concept, labor and employment law. But wow, not so much in California. So, today what we want to cover is kind of what's going on in the golden state, what is keeping our clients up at night? So, Caroline, what do you think?

Sure. Thank you, Will. Thank you for having us. There's so much going on in the golden state. It's hard for even Natalie and myself to keep up with it. But our biggest challenge and what I'm talking to my clients most about right now is PAGA. And for those of you don't know, PAGA is the Private Attorneys General Act. Although there has been many hilarious alter ego acronyms made up for PAGA, pretty much anything goes, pretty much all goes to the attorneys. I've heard it all. But PAGA is something that keeps our clients up at night and never more than it has in 2022. We'll talk about these separately but PAGA is on the Supreme court of the United States docket this year.

PAGA is going to be in the hands of the California voters this fall. And there's just a lot to talk about with respect to this law, which is essentially our bounty hunter law in California. So, to break it down very simply PAGA allows individual employee's to put on the hat of the labor commissioner in California and go out and recover penalties for the state of California on behalf of the individual employee and any other quote "aggrieved employees." And it's turned into a real money-making scheme for the plaintiff's bar because it triggers a right to recover attorney's fees.

For both the plaintiffs bar and I think I read that statistic that California recovered 88 million in 2019 alone due from these PAGA penalties because they get 75% portion of any kind of PAGA settlement.

Oh my goodness.

The only people that don't recover any money it seems for the employee's.

So, go ahead.

Oh no, I was going to say I can elaborate on why it's coming up now is like a big 2022 update because this PAGA law was first implemented back in 2000 and I'd say over the last 10 years, there's been a huge uptick in all these PAGA representative lawsuits getting filed.

Back in 2014, just to kind of lay some of the background, this case came out in [inaudible 00:04:13] basically said when employers would include waivers in their arbitration agreements for PAGA representative claims that this was unlawful under California law. And that in California, you can't waive those claims similar to how arbitration agreements can waive class actions. And then in 2015, there was a ninth circuit ruling that also held that the Federal Arbitration Act does not preempt California's laws and being able to waive these positive claims.

So over the last few years, there's been multiple petitions to the U.S. Supreme court to evaluate whether the Federal Arbitration Act does preempt these California prohibition against PAGA waivers. And just this past December 15th, 2021, this U.S. Supreme Court has agreed to take a look in this case Viking River Cruise Inc. versus Moriana to take a look. And I think that this is significant largely because the assumption is that it won't that, you know, the us Supreme court won't preserve the status quo. They would've by just simply denying this case. So I think especially given the conservative makeup of the U.S. Supreme court, we're expecting changes to be to an employer's ability to actually include PAGA waivers in their arbitration agreements.

We've always told our clients, you better have, especially our larger clients that have a lot of non-exempt employees in California. We've pretty much always tell them you should have an arbitration agreement in place and be sure that our arbitration agreement has a class action waiver. And we're hoping that we'll be able to tell them soon that you can also have a PAGA waiver, but we'll hear from the Supreme court on that this term, which means we could hear as early as this spring or the summer. So, we're starting to prepare those agreements now to make sure our clients are ready for that in case it happens.

That's great. And, you mentioned also that there's PAGA will be in the hands of California voters this year.

So, the there's a huge initiative, huge, coming in November. So, in December of last year, the California Secretary of State approved a distribution of a petition that was signed by many, many business owners and, Cal chamber has done a good job of pushing this forward, but it essentially was to put a bill on the ballot that would basically repeal PAGA and what it does is completely reshape it. This bill is called the Fair Pay and Employer Accountability Act, which is not as easy to make an acronym of as PAGA, but people are calling it FPEAA, and it's basically going to take enforcement of the California labor code out of private quote "aggrieved employee's". I E the plaintiff's attorneys that make all the money off these cases and give it back to the labor commissioner.

So, there's many components of this, and I won't get into them all in great detail, but under this new law workers will receive a hundred percent of any monetary penalties that are imposed. As the law stands now, if you're a PAGA member and you receive PAGA penalties, 75% of what the plaintiff's attorney recovers goes to the state of California and only 25% goes to the workers. So, that's going to be completely revamped, revised. The goal is that we're going to get the money to the workers that need it, that are owed the money. And another really interesting component that I think is great is that they have this consultation and policy publication unit. And that's a place where employers can of all size in all resources can call and get assistance with compliance on some of these very technical aspects of wage and hour law. So, the hope is protect employers from these lawsuits where the employee's don't really benefit anyways, and it's going to streamline what is recovered to the workers that deserve it.

OK. So, generally speaking, California employers do with arbitration agreements now and planning for the future, because we all know that California just has, as I look at the California docket every day, dozens and dozens of wage and hour class actions in, you know, including non PAGA actions. And I would think California employer's really would love to benefit from arbitration agreements with class waivers, of course, unless they get hit with thousands of single plaintiff arbitration's at the same time. But can you talk to us a little bit about arbitration in California?

Absolutely. And I think typically a lot of agreements did have carve outs or PAGA claims just because it wouldn't have been enforceable. So, I think the immediate next step should be to revise our agreements to expressly include PAGA waivers to the extent allowed under applicable law. And I think that you're exactly right, that I think the fear with the class action waivers is that there'd be a thousand individual claims being filed, which we hadn't really seen. So who knows if that will happen with PAGA claims if now plaintiffs attorneys can't go after both either class action or representative actions who knows, but I think we'll want to include that in a waiver in our arbitration agreement, just so that if it, you know, we want to reap the benefits of this decision, once it comes out.

Something else that we've had come up is, is a new law in California that restricts our ability to mandate arbitration agreements as a condition of employment. And so typically there's been very strong legal authority for being able to mandate employees as a condition of employment or condition of continued employment, to be able to sign these arbitration agreement. And currently that's in flex largely due to this new California law, which actually prohibits employer's from mandating arbitration agreements. So this is something that we want to closely analyze because there can even be criminal liability under this new law. If it's determined that we're trying to mandate an arbitration agreement and an employee refuses to sign.

But once they sign the arbitration agreement, it's fully enforceable. This is the wacky part of California law. And the judge that had a dissenting opinion on this law that Natalie's talking about said, it's basically like making, if you attempt to sell drugs, that's illegal. But if you, if you seal the deal and you sell the drugs, then that's legal. That was sort of the analogy that the judge put in her in the dissenting opinion, which I thought was interesting. So if you have executed arbitration agreements with your employees, you are fine. The only Rocky road comes, if you present it to an employee as a condition of, and they refuse to sign so.

Interesting.

It's a very interesting and very fine line. And so what a lot of our clients are doing is making those programs voluntary for the time being, and remember too, just taking a step back. I said earlier that I almost always recommend arbitration agreements for clients, especially larger clients, but arbitration is not a one size fits all. It's viciously expensive. It can become, you know, employers have to pay for it in California. And if you have a small little single plate of cake claim that gets into arbitration, that arbitrator's fee that you have to pay, which could be 10 times the amount at issue could become a bargaining chip for the employee.

So talk about arbitration with your legal counsel. We're certainly here to talk about it with our clients and make sure that it's right for you and what you want to have. A lot of my clients don't like to have arbitration for harassment claims just as part of the ethos of their operations. So, keep that in mind, it's not one size fits all, but you have to be really on top of these legal nuances right now, if you do want to of arbitration programs in place with your employees.

I agree. And we know that there's some federal initiatives to ban arbitration agreements in the workplace, and we've been following those. And of course, we design our arbitration agreements to attempt to make mass arbitration much more difficult by indicating that the plaintiff's actually have to sign the demand for arbitration or make a statement of their own personal claim and things like that. So, there are lots of strategies and lots of things to think about, but we do know that everything in employment law moves east, it starts in California and moves east. So, what else is going on that our multi-state employer should be thinking about?

I think one of the most interesting dynamics right now is the confluence of this incredibly pro worker, pro-union administration, that we have an extremely conservative Supreme court that's interpreting these laws that are coming down. I have never in, my many years, I'm not that old, but I'm old enough to have a little bit of a track record. I've never seen such interesting dynamics looking at cases that are coming out of the Supreme court hearing initiatives that are coming out of the white house. It's just a really fascinating time to be an employment lawyer. So my, I think those are big macro issues that we're going to see you percolate down as time goes on.

Natalie, any other thoughts?

Yeah, I agree with everything Caroline just said, and you know, the one topic we haven't touched on yet is that, you know, COVID is still here California. Two days ago, February 7th, reenacted our California reenacted, the California supplemental paid sick leave you so we can, you know, expect employer's to need to comply with that again. It's going to be, it provides for up to 80 hours, of supplemental, paid sick leave retroactively to January 1st, 2022 for employer's of 25 or more employees. So, that's something we should be mindful of. And, and of course any, and all other OSHA call OSHA guidelines, you know, as we, as we combat that more concert.

So, Natalie just mentioned that we have California state COVID paid sick leave is coming back to a workplace near you. And I find it ironic, frankly, because our state mandated COVID supplemental paid sick leave expired in September of 2021. And then the state and the country was hit with this massive surge of Delta and Omicron. And everyone got sick over the holidays and that's when we really needed, COVID paid sick leave. And I just, you know, now that it's sort of mellowing out, it's interesting to me that now we're going to look at another requirement for employer's to provide COVID supplemental paid sick leave. So, the timing is a little off, the intentions may be good, but the timing is a little off, but luckily there should be a component to that, that our employer's will get a tax credit similar to the federal law that was in place in 2020.

So, that is what it is. We have to follow the rules. But the other thing to remember is that you may be in a locality within California, like the county of Los Angeles or the city of Los Angeles that has different rules. So, California is unique in that we're our own country. And then we also have little fiefdoms in the cities and counties that comprise the state. So, it's a real patchwork that you have to navigate and be on top of.

Interesting fiefdom to host the super bowl this weekend as well. So

Go Ram's!

Yeah. All right. Thank you for listening to today's BR @ Work podcast, we hope that you learn some strategies that will help you achieve your business objectives through having any engaged, motivated, and energized workforce. Your jobs are challenging, and we appreciate all that you do for your organizations. But again, if you have thoughts for topics or presenters, please reach out at william.anthony@blankrome.com. And as you know, we like to close every podcast with some positive thoughts. So Caroline, let me ask you for a positive thought for the day.

Positive thought for the day. So let me ask you this before I answer, is this with my employment, lawyer, hat on, or just my human being hat on

Your human being hat.

My human being hat. Well, it's kind of both.

Okay.

I'll say this. I think that we have never seen times like we're living in now. And just like when I talk to my clients that are human resource professionals, I say, when they're making tough decisions, I say, put the human back in that human resources. I think kindness is king that applies to my professional advice to employers. It applies to when I talk to my six and nine year olds, kindness is king right now. And I think doing right by other people, even when no one's looking is going to go a long way.

That's a great message, Natalie.

I read a quote today that I liked it. You know, the quote is ,"Wherever you go, no matter what the weather always bring your own sunshine." Which I liked not only because you know, it's February and California and 80 degrees outside right now, [inaudible 00:18:00] sunny, it's kind of a reminder that we can do small little impacts of positive things throughout the day to bring that sunshine in other ways.

It's awesome. All right. Well, thank you both very much. It was a real treat to present with you and look forward to working with you again. Thanks.

Thank you will thank you for having us.

We appreciate you joining us for this episode of BR @ Work, to continue the conversation with a team of attorneys that understand your business, your needs, and priorities, and the unique risks you face. Visit us at blankrome.com. The insights and views presented in BR at work are for general information purposes only, and should not be taken as legal advice for any individual case or situation. The information presented is not a substitute for consulting with an attorney, nor does tuning into this podcast, constitute an attorney, client relationship with any kind.