In the heart of Sacramento, California, a unique labor law known as the Private Attorneys General Act (PAGA) has become a topic of intense negotiation between business lobbyists, labor groups, and Governor Gavin Newsom's administration.
The law, which allows workers to sue their employers, has been a source of considerable revenue for the state, contributing millions annually to a fund reserved for enforcing labor laws, including those against wage theft. However, despite the growing number of worker complaints and the state Labor Commissioner's Office's struggle to respond due to severe understaffing, a significant portion of the fund remains untouched, according to The Associated Press.
The fund's revenue is derived from the state's share of settlements and fines paid by businesses in response to lawsuits. Over the years, the fund has grown faster than the rate at which lawmakers and Governor Newsom have directed its expenditure, as evidenced by state budget documents. In the 2022-23 fiscal year, $197 million was left unspent, and the 2023-24 budget leaves $170 million untouched.
The fund is utilized annually to support portions of the Labor Commissioner's budget and other agencies. It has also financed worker outreach and enforcement programs, including $8.6 million in recent grants to 17 local prosecutors to pursue criminal charges in wage theft cases and a pandemic-era partnership with community groups to inform workers about their rights in 42 different languages.
However, the largest use of the fund in the past five years has been to bolster the state budget. In 2020, the state borrowed $107 million from the labor fund for other uses. An early budget agreement in April between Newsom and legislative leaders permitted the state to borrow an additional $125 million to reduce a record deficit. These loans are not required to be repaid until at least 2027. The administration has proposed to leave $119 million in the fund unused in the 2024-25 budget it's negotiating with lawmakers this month, as they seek to cover the remaining $28 billion shortfall.
The fund's use has been a source of frustration for both businesses and labor groups, who argue that more of the money should be spent to assist the Labor Commissioner's Office in hiring or retaining more staff to process a record number of workers' wage theft claims.
In an email to CalMatters, Department of Industrial Relations spokesperson Erika Monterroza stated that the loans are not unusual during budget deficits and only come from money that's not being used. She noted that $7.6 million from the fund is already allocated this year to processing wage claims.
However, the department has faced challenges in filling these new positions. A state audit released in May found that the staff shortages are partly due to a slow hiring process and salaries that are lower than some comparable state and local government jobs. Monterroza stated that decisions regarding the use of the money to increase salaries or expedite hiring must be negotiated with state employee unions. Newsom's office declined to comment, referring questions to the department.
The fund is also a part of the ongoing negotiations between business and labor on potential changes to PAGA. The aim is to remove a business-backed measure to repeal the law from the November ballot. Recent polling suggests voters favor a legislative solution over a ballot measure. The parties face a June 27 deadline for the Legislature to approve changes.
If an agreement is reached to avoid the costly ballot measure, it is likely to address how to spend the enforcement fund. Kathy Fairbanks, a spokesperson for the coalition of employers sponsoring the ballot measure, stated, "The Labor Commissioners Office has hundreds of millions currently available. We strongly support using these funds to quickly hire and train staff to help resolve employee claims."
Each year, between 30,000 and 40,000 workers file wage theft claims with the office. The state audit found that chronic understaffing has led to a backlog of 47,000 cases, and the claims regularly take six times longer than the time state law allows to resolve.
Lorena Gonzalez, leader of the California Labor Federation and a former state Assemblymember, said labor groups have advocated in past budgets to allow Labor Commissioner Lilia Garca-Brower to use the money to address the backlogs. "Obviously we have a crisis and we have been asking and pushing the Legislature and the governor to beef up spending, to hire up," Gonzalez told CalMatters. "We were having a hard time getting attention. Its one of many examples that its not a priority to process wage theft claims."
The Assemblys current and former labor committee chairpersons, San Jose Democrat Ash Kalra and Hayward Democrat Liz Ortega, both declined to comment through spokespersons. Sen. Lola Smallwood-Cuevas, a Los Angeles Democrat who leads the Senate labor committee, could not be reached for comment last week.
Jennifer Barrera, CEO of the California Chamber of Commerce, also expressed support for using available money to increase staff. However, an agreement for the state to appropriate the funds depends on broader negotiations about the scope of the PAGA law.
The two-decade-old state law allows the Labor Commissioners office to outsource the role of suing employers over alleged labor violations to private attorneys, with a worker standing in as plaintiff on behalf of the state and their coworkers. Most suits are brought over wage theft claims, according to a UCLA Labor Center report.
Business groups have long sought to repeal the law, arguing that it primarily enriches lawyers while subjecting businesses to frivolous cases over technical violations. Their ballot measure would direct cases back to the Labor Commissioners Office, where Fairbanks said workers stand to keep more money if they win individual wage theft claims.
Labor advocates argue that this would only exacerbate the backlogs at the Labor Commissioners Office and remove an option for workers to bring workplace-wide suits against problem employers. Gonzalez stated that even if the enforcement funds are spent on increasing Labor Commissioner staff, the law should still stand. The May state audit concluded the office would need nearly 900 employees to efficiently process all wage claims. Thats almost triple the positions currently approved for the office and a third of those are vacant.
"The Labor Commissioner itself is not equipped to handle all the cases were seeing in California today," Gonzalez said. "Were not fine with taking away the right of employees to sue."
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