Pub. 1 2019-2020 Issue 3

13 if federal law exempts an employee for overtime (e.g., an automotive service advisor), but California law does not provide for the exemption, a California business must pay overtime to the employee. This is why the U.S. Supreme Court’s decision in Encino Motorcars v. Navarro, which was celebrated by auto dealers throughout the country in 2018, had such little impact in California. The U.S. Supreme Court held that service advisors are exempt from overtime under the FLSA, but California law does not recognize this exemption, so the decision did not provide relief to dealers in the Golden State. To make matters worse, it’s incredibly easy for plain- tiffs’ attorneys to file lawsuits against employers in California. The most unique (and troubling) vehicle for lawsuits is the California Labor Code Private Attorneys General Act (PAGA). PAGA allows any “aggrieved employee” to easily form a class action and sue their employer on behalf of the State of California. PAGA also treats Labor Code violations as equally actionable. This means that innocuous violations such as technical errors on a paystub can expose businesses to tre- mendous liability. Predictably, these lawsuits are very lucrative for attorneys, but they often result in miniscule worker payouts. In response to this troubling environment, CNCDA and a few others are attempting to provide businesses with some relief. Relief on PAGA, and California wage and hour laws generally, can come in one of three ways – through Even if the trial court issues a favorable decision, it’s difficult to imagine the California appellate courts or the California Supreme Court overturning PAGA. Years from now, perhaps the U.S. Supreme Court will grant review in this case and overturn PAGA. Don’t bet on it. litigation, legislation, or at the ballot box. Each option is fraught with challenges. The California Business and Industrial Alliance (CABIA) is fighting to reform PAGA in the courts. Filed in November 2018, CABIA’s lawsuit alleges that PAGA is unconstitutional, because it violates due process, the separation of powers doctrine, and results in unconstitutionally excessive fines. While CABIA’s effort is valiant, it faces a long and difficult pathway through the courts. Even if the trial court issues a favorable decision, it’s difficult to imagine the California ap- pellate courts or the California Supreme Court overturning PAGA. Years from now, perhaps the U.S. Supreme Court will grant review in this case and overturn PAGA. Don’t bet on it. So, what about reform through legislation? Unfortunately, those prospects are also bleak. For the most part, major PAGA reform bills are DOA at the legislature. The legisla- ture is willing to make minor tweaks to PAGA to address narrow concerns or to benefit an interest group, such as labor. For example, AB 1654 (2018) provides construction industry employers relief on PAGA only if they have a col- lective bargaining agreement with a labor union. In con- trast, legislation that attempts to provide significant relief to all businesses dies quickly, often without a hearing. Near-term prospects at the ballot box are also not prom- ising. The vast majority of Californians are not business owners or managers, so the complexity of California’s wage and hour laws is not top of mind for voters. To make matters more challenging currently, the business community is not sufficiently unified to raise the millions of dollars necessary to promote and place a reform mea- sure on the ballot. An effort to place a significant PAGA reform measure on the ballot failed in 2018, even after CNCDA pledged significant financial support. The current regime of wage and hour laws benefits an industry of trial attorneys at the expense of businesses and common sense. Recognizing that the status quo is unacceptable, CNCDA’s Board of Directors has devoted significant association time and resources on develop- ing a potential path forward on wage and hour issues. Here at CNCDA, we are currently testing a variety of reform concepts with preeminent employment coun- sel and top public affairs consultants. In a state where Democrats outnumber Republicans by more than two- to-one, and where roughly three-quarters of the legisla- ture are Democrats, we recognize it will take time and a Herculean effort to build support for any serious reform. We anticipate this to be a multiyear effort that must be approached strategically. We will remain focused on political and legal viability to ensure the most thoughtful path to proceed in a way that achieves relief for all em- ployees and businesses harmed by the status quo. 3