PAGA Provokes Group Response

The president of a Pacoima manufacturing company has formed an organization to change a state law that allows employees to file lawsuits against companies for labor code violations, even if the employees weren’t affected by the violations. For Tom Manzo, the goal of the California Business & Industrial Alliance goes beyond opposing the Private Attorney General Act, or PAGA. He hopes to make it a platform to oppose other state labor laws, using the PAGA issue as a teaching moment for business owners, employees and lawmakers. “Our plan is we want to gain membership, we want to advocate for change but we want to educate,” said Manzo, president of Timely Prefinished Steel Door Frames. “If there is a small business out there that doesn’t even know what the PAGA law is, what the ramifications are of offering a flexible schedule, they are opening themselves up to a huge lawsuit.” The alliance had its first meeting on Aug. 24 at Industrial Metal Supply in Sun Valley. Speakers included Ken Barnes, executive director of California Citizens Against Lawsuit Abuse; Jesse Torres, deputy director and small business advocate for the Governor’s Office of Business and Economic Development; and Richard Fry, an attorney with a practice focusing on labor and employment issues. About 20 business people attended the meeting, which was kicked off by Manzo explaining the goals of the alliance. “It is going to be a strategic, tactical approach,” Manzo told the business owners. “We have a specific target and we are going to hone in on it.” The PAGA law that Manzo wants to change “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. The law was passed to get employees to help enforce labor laws, but it has turned into a nightmare for many business owners. Employers often feel caught because if they are flexible, they create PAGA liability. For example, if one employee asks to skip required work breaks in exchange for leaving early, and the employer agrees, another worker can sue under PAGA for violation of the labor code. Manzo started the alliance out of frustration after talking with other businesses. He said there is a lack of support on PAGA, even from business trade groups. “I think if the lawmakers would educate themselves a bit more on this and not be persuaded by lobbyists and see the effects of this they would have to change it and see it is not a good law,” he said. So far, the alliance has a membership of about 25 people. Companies taking an interest in the group include Argyle Haus of Apparel Inc. in San Fernando, Automation Plating Corp. in Glendale and USS-Posco Industries in the Northern California city of Pittsburg. Beyond PAGA, Manzo hopes to engage in workers’ compensation reform and other regulations of concern to the membership. Houman Salem, chief executive of Argyle Haus, said he had heard Manzo’s story about the PAGA lawsuit against Timely and became involved with the alliance. After the group got started, he began hearing other stories from businesses facing similar legal issues. “It is frightening,” said Salem, who serves on the alliance’s board. “I want to grow my business, I would love to hire more people but I am frightened. Every employee is a potential nightmare at this point. California is 50th out of 50 states in terms of business friendliness and that needs to change.” Another company that has joined the alliance is Town & Country Event Rentals in Van Nuys. It faced a PAGA lawsuit filed by two former employees that owner Richard LoGuercio settled for $1.2 million. LoGuercio was enthusiastic about supporting Manzo and his group. He said he admired him for taking “the bull by the horns” to let business owners know about the PAGA law. “I back him a 1,000 percent,” he added. LoGuercio also serves on the board of the alliance. The legal action against Town & Country was about a lack of documentation on when employees took their lunch breaks. The company had never received one complaint until a pair of former employees filed their lawsuit. “It is a cash grab for the lawyers and the state of California,” said LoGuercio, referring to PAGA. “It’s a joke.” Reform options While Manzo said that ultimately he would like to see PAGA overturned, in the short term he wants to change the law to allow for a 90-day period in which businesses can correct a problem. “That is a reasonable avenue to take,” Manzo said. “It is not a major change to the law. It is saying wait a minute and take a break to see what the company is doing.” Lobbying efforts have started with former state lawmaker Shannon Grove, who while in the California Assembly was able to amend the law to allow employers time to make corrections to pay stubs. Through the Valley Industry & Commerce Association, or VICA, Manzo was among 40 members of that group to tell Assembly member Adrin Nazarian (D-Sherman Oaks) earlier this month about PAGA abuses. Manzo said that Nazarian was non-committal in wanting to pursue changes to the law. Stuart Waldman, president of VICA, said the group has discussed the issue with lawmakers when it has gone to Sacramento. It was his belief that most legislators are not aware of the situation, he added. “We are going to continue to meet with legislators and try to come up with a workable solution that is acceptable legislatively,” Waldman said. One tactic that does not appear workable is a direct legal challenge to the law. Manzo said he has heard from multiple people that the state is a hard entity to sue and he would “not have a leg to stand on.” Waldman thinks the PAGA lawsuit issue could develop in the same way as the reaction to abuse of the Americans with Disabilities Act. As the public and lawmakers learn more about the abuse, it leads to a different mindset. Monzo’s alliance is definitely important and needed, especially because it is focused on a single subject, Waldman said. “Having this organization to provide resources and connect people will help with the ability to bring change on this issue,” he added. LoGuercio of Town & Country couldn’t agree more on the importance of Manzo’s role. “Hopefully something will happen,” he said. “It seems like he is really getting this together.”