California Leads Nation in Mass Layoffs Due to PAGA Lawsuits

California Leads Nation in Mass Layoffs Due to PAGA Lawsuits


California has become the leader in mass layoffs, surpassing Texas, the second largest state in America. The surge in layoffs can be attributed to the Private Attorneys General Act (PAGA), which allows employees to file lawsuits against their employers on behalf of themselves, other employees, or even the state of California. Originally intended to protect workers in under-the-table businesses, PAGA lawsuits have increasingly targeted regular businesses for minor offenses.

One major issue with PAGA is its impact on the viability of legitimate businesses and the job security of their employees. Research the California Business and Industrial Alliance shows that employers subjected to PAGA lawsuits are much more likely to issue WARN notices, indicating mass layoffs or business closures. In fact, employers with a PAGA settlement were 258 times more likely to issue a WARN notice in fiscal year 2021/2022, and 126 times more likely in fiscal year 2022/2023.

The cost of PAGA settlements is also staggering. On average, each employer had to pay almost $4 million in the past fiscal year, with attorney fees totaling over $1 million. For smaller businesses, this unexpected cost can have a disastrous effect. In the 2022-2023 fiscal year, the number of employees subjected to WARN notices increased from 1 million to 3 million, indicating a significant and ongoing impact.

Furthermore, the flood of minor PAGA lawsuits, including those over small issues like typos on paystubs, overshadows legitimate claims of serious labor law violations. Employers are now more likely to settle these lawsuits to avoid hefty fines, even if the claims are not valid. As a result, employees who have genuinely suffered harm in the workplace are less likely to receive justice.

Private trial lawyers are the ones benefiting the most from PAGA, using it as an opportunity to exploit California employers. In the past six years alone, private trial lawyers have collected an astounding $8 billion through PAGA settlements. It is clear that these lawsuits are driven personal gain rather than genuine concerns about labor law violations.

The high cost of PAGA lawsuits has forced many businesses to reduce hiring and investments, ultimately damaging California’s economy. Numerous businesses have even chosen to relocate outside the state, resulting in the loss of tens of thousands of jobs. Even established brands like Jamba Juice have made the difficult decision to leave California.

Although PAGA may have initially aimed to provide recourse for those left behind labor legislation, it has deviated significantly from its original intent. As Californians already struggle with a high tax burden and an unfavorable business climate, the influx of minor lawsuits that primarily benefit lawyers is the last thing the state needs. It is evident that PAGA is not a good fit for California.

– California Business and Industrial Alliance
– California Chamber of Commerce