A state labor law passed in 2004 has grown into a financial nightmare for small businesses such as Town & Country Event Rentals.

The Van Nuys company recently settled a potential $29 million lawsuit over missed lunchbreaks. The suit was filed by two disgruntled former employees represented by a lawyer who utilized the Private Attorneys General Act, also known as PAGA.

The state law “authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees and the State of California for labor code violations.” So under PAGA, any employee can sue for breaches – such as missed lunchbreaks or unpaid overtime – even if he or she wasn’t directly affected by them.

In the Town & Country case, the employees went to a lawyer to see if they could sue for wrongful termination. Soon after, the company’s meal and break practices were called into question as a separate legal matter.

“I’ve been in business for 35 years, and I’ve never had one person complain to me that they didn’t get their lunch or didn’t get their break,” owner Richard LoGuercio told the Business Journal. “We got called on the carpet for five years of no one in the entire place – nobody – getting lunch. … I didn’t document it, so I had to pay.”

Read the full story in the May 1 issue of the San Fernando Valley Business Journal.