Business owners and leaders near and far are welcoming changes to one of the state’s most controversial business laws.

On July 1. Gov. Gavin Newsom signed legislation to reform the Private Attorneys General Act (PAGA), reaching an agreement between business and labor groups.

Enacted in 2004, PAGA allows employees to sue their employers for Labor Code violations on behalf of themselves, other employees and the state.

The law was crafted to protect employees’ rights and to encourage workers to settle labor disputes outside of internal complaints, but many business owners and business groups have derided PAGA as being detrimental and costly to business.

Scott Miller, CEO of the Fresno Chamber of Commerce, said PAGA has been a serious challenge for businesses for some time. He praises the reform.

“Restoring some common sense to the process is a very welcome change,” Miller said.

The changes will reform the penalty structure, reduce and streamline litigation, improve measures for injunctive relief and standing, and strengthen state enforcement.

The reform will cap penalties on employers who quickly take steps to fix policies and practices and make workers whole after receiving a PAGA notice. If employers proactively comply prior to receiving a notice will also be considered.

Miller noted that the right to correct is the most significant improvement borne out of the reforms to PAGA.

It also creates new, higher penalty on employers who act maliciously, fraudulently or oppressively in violating labor laws.

Prior to the recent reforms, minor clerical errors, such as mistakes on addresses or on a check, were treated as seriously as genuine wage theft, Miller said.

Penalty money from PAGA lawsuits that goes to employees is increasing from 25% to 35%.

The new law expands which Labor Code can be cured to reduce the need for litigation and make workers whole quickly.

It now requires an employee to personally experience the alleged violations in a claim.

The law also gives the Department of Industrial Relations the ability to expedite hiring and fill vacancies to ensure effective and timely enforcement of employee labor claims.

Miller said PAGA has proven costly for businesses.

“A lot of people are very relieved and grateful. It’s been a specter hanging over the heads of small businesses. Frivolous lawsuits will not be as common going forward, hopefully”, he said.

Tom Manzo is founder and president of the Southern California-based California Business and Industrial Alliance (CABIA). He founded the trade organization in 2017 along with business executives and entrepreneurs to fix PAGA.

Manzo said he is glad the Legislature finally decided to bring some changes to PAGA but is still waiting to see how the changes will playout in practice.

“Everybody needs to keep a close eye on how it’s working in real life,” Manzo said.

He questions if the state would have enough workers to handle claims, especially for businesses that have less than 100 employees.

The law reforms do not apply to nonprofit legal aid organizations that are generally backed by large labor unions, Miller said.

The reforms to PAGA will only apply to lawsuits filed after June 19 of this year.

Manzo said the state needs to hire people immediately to handle these cases.

“I hope the state has a ‘Help Wanted’ ad going out to people,” he said.

Miller said there is no need to deputize private citizens to enforce labor laws.

PAGA has had an impact on the ag industry as well, noted Daniel Hartwig, president of the Fresno-based California Fresh Fruit Association (CFFA).

“CFFA is grateful that the coalition was able to come together and reach a solution to the scourge of PAGA lawsuits. Far too many ag employers have been on the receiving end of these shakedown lawsuits and have spent millions of their hard-earned dollars in attorney fees to make them go away. This reform effort helps protect employers and employees,” Hartwig said in a statement.

The CFFA is comprised of more than 300 members, including growers, shippers and marketers of fresh grapes, blueberries and tree fruit.