PAGA in State of California
May 16, 2024
by a searcher in Illinois, USA
Hello searchers and acquisition entrepreneurs,
Anyone has any idea on PAGA in state of California and validity of it,
https://cabia.org/paga-summary/
It looks like sharks are out there to just file notices against any businesses regardless of their tenure or size etc and hoping to get a pot of cash from somewhere.
Is this a deterrent for any searchers to buy business in this state.?
from University of Maryland in 4040 Civic Center Dr, San Rafael, CA 94903, USA
Unfortunately in California, a business cannot insure against wage claims I do not believe (I'm not a lawyer but fairly certain on that point).
I also would concur that because of California's very labor friendly laws and liberal leaning politics, it setup a system that while well intentioned, unleashed a monster in that there are "ambulance chaser" law firms, mostly in Socal, that will spam the state attempting to drum up business. Some law firms actually have employed business development people specifically focused on attempting to drum up claims. California has also stacked the laws against business making it nearly impossible to ever be 100% compliant (e.g. rounding right to the minute for pay is a law, if all employees clock in at the same time, you're already considered guilty, etc..)
And in most cases, when a case is settled, guess who gets the lion's share of the settlement? Lawyers and administrators, not even the employees it was meant to protect.
Pros and cons to doing business in California for sure, its the largest state in the union, 39 million people, huge market potential, and thousands of businesses already here making great money. Just budget in your deal an increased cost of insurance and HR compliance consultant and then assume there will be legal fees as the cost of doing business.
Maybe the state will do something to swing the pendulum to a more fair and balanced system but unfortunately I doubt that will happen until California politics gets a wake up call on how too far to one side they have swung.
from University of Utah in Irvine, CA, USA
PAGA is real and attorneys will typically prey on particular industries. My current industry (restaurants) is definitely one of them, as ^redacted mentioned. And the bigger your company, the more you'll be targeted.
I ran a large restaurant company through COVID and among the 127 restaurants I ran, I had 10 restaurants in California. We didn't have any claims in my time, but they are very real. The best defense, in my opinion, is to focus on having great leadership within your company. If your leadership is accountable in terms of paying attention to things like meal breaks, overtime, and appropriate discipline when things go wrong, you can significantly reduce these claims. It's also important to have the appropriate insurance.
That said, depending upon your industry, you may not need to be in California. For restaurants, I believe it's still a great place to do business. Among the 17 states I operated, California by far performed the best in terms of sales, profit, and workforce quality. That said, if you're a manufacturing company and don't need to be here, it may be better to operate out of another state. I think it needs to be a strategic move, but it certainly is manageable.