Blog - Tag: Measured Risk Insurance
Cal/OSHA Proposed Workplace Violence Prevention Rules Muddy the Waters
Cal/OSHA has proposed new regulations that would incorporate California’s new workplace violence prevention law — which took effect July 1 — into Title 8, the set of regulations that covers workplace safety in the Golden State.
However, the proposed rules add a number of new requirements that some safety observers say would be unworkable in many workplaces and may create burdensome new standards for employers to follow.
Under the law passed last year, SB 553, virtually all California employers are required to establish, implement and maintain an effective workplace violence prevention plan and effective procedures to respond to “actual or potential” workplace violence emergencies.
The proposed additional requirements surpass those set out in state Labor Code as a result of SB 553. Here’s a look at some of the most significant changes.
Workplace controls
The proposed regulations list a number of acceptable procedures and rules that can be used to effectively reduce workplace violence hazards, including:
- Appropriate staffing levels,
- Hiring dedicated security personnel,
- Effective means to alert employees of the presence, location and nature of a security threat,
- Control of visitor entry, and
- Methods and procedures to prevent unauthorized firearms and weapons in the workplace.
Engineering controls
The proposal adds a number of suggestions for engineering controls that can help prevent violence in the workplace. These include:
- Electronic or mechanical access controls to employee-occupied areas,
- Weapon detectors (installed or handheld),
- Enclosed workstations with shatter-resistant glass,
- Deep service counters,
- Spaces configured to optimize employee access to exits, escape routes and alarms,
- Separate rooms or areas for high-risk persons,
- Locks on doors,
- Affixing furniture to the floor,
- Opaque glass windows (which can protect privacy, but allow employees to see where potential risks are),
- Improving lighting in dark areas, sight-aids, enhancing visibility and removing sight barriers,
- Video monitoring and recording, and
- Personal and workplace alarms.
The proposed rules also list situations or locations that have a higher risk of workplace violence. These include:
- Employees working alone or in locations isolated from other employees,
- Areas with poor illumination or blocked visibility (such as blind spots),
- Entries to places of employment where unauthorized access can occur,
- Work locations that lack effective escape routes,
- The presence of money or valuable items such as jewelry or luxury goods,
- Frequent or regular contact with the public,
- Working late at night or early morning, and
- Selling, distributing or providing alcohol, marijuana or pharmaceutical drugs.
The draft language would bar employers from requiring or encouraging employees to confront individuals suspected of theft or of engaging in violence in the workplace, except for dedicated security staff.
Finally, the proposed regulations outline steps employers can take when responding to and then investigating a case of workplace violence, post-incident:
- Provide immediate medical care or first aid to workers who have been injured in the incident,
- Identify employees involved in the incident,
- For employers with more than 25 employees, make available individual trauma counseling to those staff affected by the incident,
- Conduct a post-incident debriefing as soon as possible after the incident with employees, supervisors and security involved in the incident,
- Identify and evaluate workplace violence hazards that may have contributed to the incident,
- Identify and evaluate whether appropriate corrective measures developed under the firm’s workplace violence prevention plan were effectively implemented, and if any new or additional corrective measures should be made, and
- Solicit from employees involved in the incident their opinions regarding the cause of the incident, and whether any measures would have prevented it.
The takeaway
The proposed rules are just the first step. They still have to go through a public comment period and the Division of Occupational Safety and Health, which writes new regulations.
However, the rules have already received plenty of pushback from employers.
Karen Tynan, an attorney specializing in workplace safety and health for the Ogletree Deakins law firm, told the Cal-OSHA Reporter that there are potential pitfalls in the added provisions. The examples of engineering and work practice controls “may be helpful to employers, but certainly we don’t want to see inspectors demanding these examples in every workplace,” she said.
She also criticized the post-incident response procedures as “overbroad and overly burdensome. The demand for a post-incident investigation report will be incredibly difficult for even mid-sized employers or employers who do not regularly face workplace violence hazards.”
What Business Insurance Policies Cover Rioting, Looting
Protests and mass demonstrations that can sometimes descend into rioting and civil unrest are becoming more common not just in the U.S., but all over the world. Businesses can sometimes unwittingly become collateral damage from vandalism and looting.
It doesn’t have to be a retail establishment; office buildings and other commercial properties can also face looting and damage during civil unrest. For business owners whose properties are damaged or destroyed, the ordeal can be both unsettling and stressful as they wrestle with the specifics of filing insurance claims.
Fortunately, you don’t need special insurance policies to cover these events. Your basic commercial property policy and commercial auto (if you have business vehicles that are damaged) will usually suffice.
Here’s a look at what your policies may cover and how to prepare for filing a claim if your business is damaged during rioting or civil unrest.
Property damage
Standard commercial property policies cover damage to a business property caused by fire, explosion, riot or civil commotion, vandalism or malicious mischief. This would include coverage to the structure, as well as any inventory, fixtures and other contents. Business owner’s policies also include this risk.
Damage payouts would be subject to sublimits (specific or blanket) for inventory, fixtures and other items, as well as the policy deductible.
Commercial vehicle damage
For business-owned vehicles to be covered for damage for these types of events, you’ll want to ensure that you have purchased comprehensive coverage, which is an optional, but highly recommended part of your policy.
Comprehensive coverage may cover a vehicle if it is:
- Stolen,
- Damaged, or
- Destroyed.
One of the most common damages to vehicles during riots is broken windshields, which you can usually get covered with an optional glass coverage rider.
Business interruption coverage
Companies that are forced to close as a result of rioting and looting damage may have coverage for business interruption under a business property policy.
Business interruption insurance may cover lost income if a company is unable to operate after its premises were damaged during a riot or social unrest. Coverage may also apply if a business suffers a loss of income because of curfews or if authorities bar access to a property.
Coverage is typically triggered if there is direct physical damage to the premises.
Filing a claim
When filing a claim, read your policy or give us a call to determine how to best present it. It’s important to understand the policy’s limits and deductibles before spending time documenting losses that may not be covered.
If you are going to file a claim, document all damage. Keep receipts for all your inventory and fixtures.
In the event of a claim:
- Take photos of all damage.
- Contact your agent and file a claim immediately.
- Clean up to protect your building, but do not make major repairs until you talk to the insurance company.
- Keep receipts for any remediation work.
If you’re going to file a business interruption insurance claim, you will need:
- Pre-riot financial statements and income tax returns.
- Post-riot business records.
- Copies of current utility bills, employee wage and benefit statements, and other records showing continuing operating expenses.
- Receipts for building materials, a portable generator and other supplies needed for immediate repairs or remediation.
- Paid invoices from contractors, security personnel, media outlets and other service providers.
- Receipts for rental payments, if you move your business to a temporary location.
Note: Many policies require a 72-hour waiting period before a policyholder can begin making a business interruption claim. That’s because the first three days of business shutdown, access constraints or limited hours of operation because of a civil authority action, are often excluded from coverage.
There may also be a limit to the claim period. A standard limit is up to three weeks of losses.
More Businesses Sued Over Disabled Website Access
Businesses with a web presence, particularly those that are consumer-facing, are increasingly being sued over website accessibility issues that prevent disabled individuals from using a website.
While the number of such cases has been growing, 2,281 website accessibility lawsuits were filed in 2023, down from 2,387 the prior year and 2,352 in 2021, according to a report by Accessibility.com, a firm that helps businesses make their websites useable for certain disabled individuals.
The drop in cases actually filed is due to more organizations settling with law firms without going to court, in light of the fact that there was an 18% year-on-year increase in demand notices in 2023, the report concludes.
For businesses with customer-facing websites, this is a new risk that must be taken seriously as people can access the websites from anywhere in the country. Just because a business is located in say, Kentucky, a person in New York may sue in their local jurisdiction over website access issues.
Even if a business succeeds in fighting one of these cases, the litigation costs can be substantial.
What is website accessibility?
Website accessibility refers to the extent to which a site can be used by individuals with disabilities. This can include people who are blind or have low vision, those who are deaf or hard of hearing, and people with mobility impairments, cognitive disabilities or other disabilities.
It involves designing your website so that its content is available to and functional for everyone, including those who might use assistive technologies like screen readers, voice recognition software, or specialized input devices.
What’s happening?
The Americans with Disabilities Act allows individuals with disabilities to bring lawsuits against businesses directly. A plaintiff can seek injunctive relief, such as asking for a court order requiring the website to be changed as well as attorneys’ fees or costs. However, the ADA does not permit the recovery of monetary damages in these cases.
That said, many states, including New York and California, have enacted state laws allowing individuals to recover monetary damages for disability discrimination. Courts in both states have ruled that websites are places of public accommodation akin to establishments with physical locations, and, thus, are subject to the ADA.
As a result, more than 85% of website accessibility lawsuits are filed in those two states, according to the Accessibility.com report.
There are indications that filing these types of lawsuits has become a moneymaker for a few law firms and individuals. The report found that:
- New York had nearly 73% of all the cases filed nationwide, followed by California and Illinois.
- Over 69% of all website accessibility lawsuits were filed by five law firms out of New York and California.
- Almost 16% of website accessibility lawsuits in 2023 were filed by five plaintiffs. One of them filed more than 105 lawsuits that year after filing 108 in 2022. The report found that four other individuals filed between 52 and 78 cases apiece in 2023.
What should businesses do?
Most of these lawsuits cite the “Web Content Accessibility Guidelines,” published by the World Wide Web Consortium. While these guidelines are advisory only, they have become the standard to follow when making websites accessible to individuals with disabilities.
Courts have accepted these guidelines as the applicable standard for ADA website accessibility compliance. Many of these cases are settled with the condition that the website become compliant with WCAG, which is focused on making websites perceivable, operable, understandable and robust.
There are widgets that can be installed on websites to ensure they comply with the WCAG, but even so, 933 lawsuits filed in 2023 were against businesses that had installed such widgets on their websites.
Experts recommend:
- Regularly checking your website and digital content to ensure it is accessible to individuals with disabilities.
- Ensuring that your website complies with the latest WCAG guidelines and includes a general statement regarding accessibility and a clear indication of how to contact your company if an issue with accessibility arises.
- If necessary, hire an outside vendor that can bring your website into compliance with the WCAG guidelines.
- If you receive an ADA demand letter or complaint, you should consult with attorneys who are experienced in these types of cases.
Cal/OSHA Proposed Rules Would Impose Large Penalties for ‘Egregious,’ ‘Enterprise-Wide’ Violations
Cal/OSHA is working on new rules that would crack down and step up enforcement and penalties against California employers that commit “egregious” and “enterprise-wide” workplace safety violations.
The forthcoming rules would impose substantial penalties on companies that have shown a disregard towards California workplace safety regulations and the wellbeing of their employees. Employers that are cited for egregious violations could be fined up to $158,000 “per instance,” meaning it can be applied for each employee exposed to the violation. And there’s more.
Employers that are cited for egregious violations could be fined up to $158,000 “per instance,” meaning it can be applied for each employee exposed to the violation.
As well, businesses with multiple locations will have to be especially mindful of complying with Cal/OSHA regulations to ensure they are not snared for the same violations at two or more locations.
The new rules implement a 2021 law, SB 606, and will bring Cal/OSHA’s rules in line with Fed-OSHA’s as federal law requires that state-run OSHA enforcement programs to be “at least as effective” as the federal program.
Here’s what’s on tap:
Enterprise-wide violation
Under the proposed rules, a violation is enterprise-wide if an employer has multiple worksites and either of the following is true:
- The employer has a written policy or procedure that violates occupational safety and health regulations; or
- The Division of Occupational Safety and Health has evidence of a pattern or practice of the same violation or violations involving more than one of the employer’s worksites.
The proposed penalty for enterprise-wide violations is multiplied by the number of worksites covered at inspection, up to a maximum of $158,727 per exposed worker, and will be adjusted each year for inflation.
If an employer fails to abate violations noted by a Cal/OSHA inspector at any worksite covered by the citation in a timely manner, a separate “failure to abate” penalty of up to $15,000 may be assessed for each instance.
Egregious violation
The proposed rules define an egregious violation as a willful violation where the employer has had a previous egregious violation in the past five years. One or more of the following apply:
- The employer, intentionally, through conscious, voluntary action or inaction, made no reasonable effort to eliminate the known violation.
- The employer has a history of one or more serious, repeat or willful violations or more than 20 general or regulatory violations per 100 employees.
- The employer intentionally disregarded its health and safety responsibilities, such as by failing to maintain an effective Injury and Illness Program, ignoring safety and health hazards, or refusing to comply with the Cal/OSHA Act.
- The employer’s conduct, taken as a whole, amounts to clear bad faith in the performance of their duties to comply with occupational safety and health standards.
- Within the five years preceding a citation for an egregious violation, the employer has committed more than five violations of any Title 8 standard that has become finalized.
- The violations resulted in worker fatalities, a worksite catastrophe, or five or more injuries or illnesses. Catastrophe is defined as inpatient hospitalization of three or more workers from a workplace hazard.
- Within the 12 months immediately preceding the underlying violation, 10% of all employees at the cited worksite sustained workplace injuries or illnesses.
According to the Cal-OSHA Reporter newsletter, it’s expected that the proposed maximum penalty for egregious violations will be $158,727, adjusted each year according to the consumer price index. Importantly, each employee that is exposed to an egregious violation would be considered a separate violation. Since the penalty can be assessed on a per-instance basis, it could quickly spiral for some employers.
The takeaway
The proposed regulations pose the largest risk for companies with multiple locations.
Employers should double down on their workplace safety efforts and ensure that there is buy-in to the program from top management down to supervisors and line workers at all locations.
Commissioner Orders Benchmark Workers’ Comp Rate Reduction
California Insurance Commissioner Ricardo Lara has ordered that the state’s average benchmark workers’ compensation rate be cut by 2.1%, starting Sept. 1.
The decision rejected the Workers’ Compensation Insurance Rating Bureau’s recommendation that the benchmark rate be raised by 0.9%, citing a slight uptick in claims costs and claims-adjusting costs.
The benchmark rate, also known as the pure premium rate, is a base rate that insurers can use to price their policies. It only includes only the cost of claims and claims-adjusting costs and does not take into account other forms of overhead and profits.
Each class code gets its own pure premium rate, and some classes may see increases and others further decreases. Every employer’s premiums will differ depending on their claims experience, industry and location.
Also, insurers are not required to use the pure premium rate and are free to price their policies as they see fit.
The decision is a further reflection of the low pricing environment for workers’ compensation, a rare bright spot in an insurance market that has seen hefty rate increases in other lines, such as commercial property and liability coverage.
The average benchmark rate will fall to $1.38 per $100 of payroll, down from the current $1.41.
Reasons behind Lara’s decision
Factors that the commissioner cited as influencing his decision include:
- The continuing decrease in the number of medical services associated with each workers’ comp claim, and
- A continuing decline in the percentage of claims with permanent disability benefits.
The new rate applies to policies incepting on or after Sept.1, 2024.
If you have questions about your coverage, please give your agent a call.
Electric Tools Pose Dangers, Train Staff in Proper Usage
Each year, hundreds of construction workers suffer shock when handling electrical tools and equipment.
One of the big problems in understanding the dangers of electrical shock is the mistaken belief that only high voltages kill. It’s not the voltage that’s lethal, but the amount of current that passes through the body. The condition and placement of the body has a lot to do with the chance of getting a shock.
It’s important that employers train their workers about the basic facts regarding the causes of electrical shock when using these tools.
Water and electricity
Damp areas and metal objects can offer good shortcuts for electricity to reach the ground. If a worker’s hands are sweaty, if socks and shoes are moist or damp, if the floor is wet or they are standing in a puddle of water, the moisture may allow more current to pass through the body.
If work is to be done with metal objects or in damp areas, workers should recognize the hazards and take necessary precautions. These include:
- Rubber gloves and boots,
- Rubber mats,
- Insulated tools, and
- Rubber sheets that can be used to cover exposed metal.
Also, during times of rain, extra caution should be taken when working with electrical equipment or working near grounded objects.
Other precautions
It’s not just the presence of water that can cause a worker to be electrocuted. Electricity is always a danger, and workers should take all precautions necessary to avoid injury or death.
It’s important that you teach them the following:
- Treat every electric wire as if it were a live one.
- Inspect equipment and extension cords before each use.
- Take faulty equipment or plugs with bent or missing prongs out of service for repair.
- Only qualified electricians should repair electrical equipment or work on energized lines.
- If a plug doesn’t have three prongs or if the receptacle doesn’t have three openings, make sure the tool is grounded in some other way before use.
- Never try to bypass an electrical system by cutting off the third prong of a plug.
- Turn off the power and report the smell of hot or burning plastic, smoke or sparks, or the presence of flickering lights.
- Stop using a tool or appliance if a slight shock or tingling is felt.
- Never disconnect an electrical plug by pulling on the cord.
- Whenever working on an electric circuit, the circuit should be turned off and locked out at the circuit breaker or fuse box to ensure that it cannot be accidentally turned on.
- Those who regularly work on or around energized electrical equipment should be trained in emergency response and CPR.
The takeaway
The use of electrical tools requires additional precautions on the part of your workers. It’s important that you train them in proper usage and how to spot potential dangers of electrocution.
EEOC Issues Updated Workplace Harassment Guidance
For the first time in 25 years, the Equal Employment Opportunity Commission has issued updated workplace harassment guidance for employers, increasing possible exposure to employee-initiated lawsuits.
The new guidance expands employee protections to include harassment based on sexual orientation and gender identity, as well as taking into account that harassment can be perpetrated virtually via text messaging, e-mails and other online or app-based mediums.
These are federal guidelines, meaning that they open a new avenue for potential employment practices liability exposure. Employers should understand this new guidance to ensure they don’t run afoul of the law and risk being sued by a worker.
Sex-based harassment
The new guidance expands the definition of sex-based harassment to include harassment related to breastfeeding, morning sickness, contraception and the decision to obtain — or not obtain — an abortion.
It also expands protections to include harassment based on sexual orientation and gender identity. An example of the latter would be an employer intentionally and repeatedly using a name or pronoun that is inconsistent with the worker’s gender identity, or denying access to bathrooms that are consistent with their identity.
Virtual harassment
The guidance notes that harassment does not have to be perpetrated in person to be illegal.
It states that harassment can also occur in the “virtual work environment,” such as through the company e-mail system, electronic bulletin boards, instant message systems, videoconferencing technology, intranet or official social media accounts.
The EEOC stated that while off-duty offensive social media posts sent on work systems generally don’t constitute harassment, they may if they impact the workplace, such as if the postings are directed at a particular employee or employer and are referenced at work.
The agency also stated that even if offensive material is sent while off-duty on non-work systems, like using personal phones or tablets to text harassing messages or making derogatory posts on their own social media accounts, it could be considered illegal.
The takeaway
The EEOC has designated workplace harassment as an enforcement priority.
Employers should update their anti-harassment policies and procedures in their employee handbooks to reflect the changes to EEOC guidance. Managers and supervisors should be trained in the new guidance as well.
The EEOC recommends that anti-harassment policies, at a minimum:
- Define what conduct is prohibited, and be widely disseminated;
- Be comprehensible to workers, including those whom the employer has reason to believe might have barriers to comprehension, such as limited literacy skills or proficiency in English;
- Require that supervisors report harassment when they are aware of it;
- Offer multiple ways to report harassment;
- Identify points of contact to whom reports of harassment should be made, including contact information; and
- Explain the employer’s complaint process, including the anti-retaliation and confidentiality protections.
OSHA Updates HazCom Standard
Changes are once again coming to Fed-OSHA’s Hazardous Communications Standard, which governs the handling of chemicals and other dangerous substances.
OSHA’s final rule, which takes effect July 19, 2024, will bring the standard in line with the latest update to the United Nations’ Globally Harmonized System of Classification and Labelling of Chemicals.
The update revises criteria for the classification of certain health and physical hazards, as well as updating labeling requirements and safety data sheets (SDSs), among other changes.
OSHA said it had updated the HazCom standard “to better protect workers by improving the amount and quality of information on labels and safety data sheets and allow workers and first responders to react more quickly in an emergency.”
Affected firms will have to update any alternative workplace labeling as well as their HazCom program, and provide any additional employee training for newly identified physical, health or other hazards.
Compliance deadlines are staggered:
First: Chemical manufacturers, importers or distributors evaluating substances will have to comply by Jan. 19, 2026, while those that evaluate mixtures will have to comply by July 19, 2027.
Second: Other employers will have to comply six months after those dates: July 19, 2026 for those that handle, store or use substances, and Jan. 19, 2028 for mixtures.
It’s important for employers to stay up to date on the HazCom standard to protect their workers. Labels and SDSs are often the first indication to a worker that they are handling a hazardous chemical, so it is imperative that they be as accurate and complete as possible.
What the rule does
The new rule ensures that OSHA’s HazCom standard jibes with the Global Harmonized System, which is used in most developed and many developing countries around the world. It provides consistent definitions of hazards, specific criteria for labels, and a specific format for safety SDSs.
It should be noted that the new classification criteria only affect SDSs and labels for certain products (aerosols, desensitized explosives and flammable gases). If your firm handles any of these you will have to ensure that your labels and SDSs for select hazardous chemicals are updated accordingly.
Some of the highlights of the rule:
Labeling — It updates labeling requirements for certain very small containers and bulk containers to ensure the labels are comprehensive and readable.
Manufacturers must also only provide the updated label for each individual container with each shipment once the product reaches its customer. Warehousing employees will not be required to open sealed pallets and boxes of containers to relabel them or repackage the product in preprinted bags.
Flammable gas addition — The flammable gas hazard class gets a new hazard class (desensitized explosives), as well as new hazard categories:
- Unstable gases in the Flammable Gases class
- Pyrophoric gases in the Flammable Gases class, and
- Nonflammable aerosols in the Aerosols class.
New and revised definitions — There are a number of definitions that are being revised or which are new altogether.
Employer takeaway
HazCom citations are one of the most common citations that OSHA issues. If your operations handle chemicals, you should take the opportunity now to review your HazCom programs and plan for compliance by the deadline that affects your company.
Light Duty Can Reduce Workers’ Comp Claims Costs
After an employee is injured on the job, recuperation times can vary, but every day they are away from work, the claim cost increases and your productivity suffers.
By implementing a program that offers a good incentive to return, you can reduce the risk of paying more benefits than necessary.
Recent research shows that employers lose about 80 million workdays annually due to workplace injuries or illnesses. The number of employees who remain away from work for more than seven days because of injuries or illnesses stretches into the millions.
This means that employers are left to deal with the high cost of workers’ compensation premiums, lost productivity and disability benefits. But, by creating a special incentive program, you can greatly reduce these costs.
Light duties
When an injured worker is off work and healing, a physician will regularly examine them. These exams will in part determine whether the worker is ready to return to their previous tasks.
In some cases, it may be possible to get the individual back to work sooner with light duties.
For example, consider a worker who is injured while lifting boxes in a warehouse. The attending physician will be examining the employee to determine whether he or she is ready to lift boxes again.
If the employee has a back injury, it could be several weeks before they can return to work.
But, if the employer offered the worker an easy temporary job in the office, they may be able to return much sooner. To make something like this happen, a light-duty program must be put in place. A solid program should have the following features:
- Addresses environmental, physical, knowledge and emotional factors that may prevent employees from returning to work.
- Makes the transition to full-time work easier.
- Focuses on employees’ abilities instead of their disabilities.
Light-duty programs improve employee morale by increasing incentives for returning to work and staying safe. For the employer, they maintain productivity by lowering the number of lost work days.
These programs help speed up employees’ recovery processes. Recent research shows that 50% of workers who stay out of work for more than six months will never return to their jobs. If they stay out for more than one year, the likelihood of returning to work is about 10%.
Getting employees back to work as quickly as possible is the best way to bring about feelings of being part of the team. It also lessens the financial impact on the employee and their family.
The elements of a solid plan
To make sure a program is as comprehensive as possible, include the following elements:
- Performing meaningful tasks instead of simple busy work.
- Coordination with the doctor about work restrictions.
- Alternative work assignments that benefit the employer and employee.
- Descriptions of duties the injured employee must perform.
- Provisions for situations where employees may have to take additional medical leave time after returning to work.
- Stated conditions and time parameters for temporary assignments.
Benefits of return-to-work programs
- Making it easier to keep valuable employees, who are productive while recovering.
- Making communication happen between employees, employers and doctors, instead of between employees and their doctors.
- Making it difficult for employees to stay out of work longer than necessary.
- Reducing the need to recruit, hire and train new workers.
- Reducing the cost of workers’ comp disability payments to injured workers.
- Showing your concern for the injured employee’s health.
- Reducing claims costs, which can help reduce your rates.
The takeaway
Workers’ compensation consumes a sizable portion of overall personnel costs. A solid return program can reduce those costs, including intangible ones, like the absence of an experienced worker. Also, it is good for employee morale.
Newsom, Business Groups Agree on PAGA Reforms
California Governor Gavin Newsom, legislators and business groups have struck an agreement to reform a law that has become a costly thorn in the side of employers operating in the state, the Private Attorneys General Act.
The deal averts a showdown over a business-backed initiative slated to be on the November ballot that would repeal the law outright. The reform legislation seeks to keep the law intact while limiting frivolous litigation by allowing employers to make things right after a PAGA action has been filed.
PAGA allows workers who allege they have suffered labor violations, like unpaid overtime or being denied mandatory meal and rest breaks, to file suit against their employers rather than the more typical route of filing a claim with the state Department of Labor Standards Enforcement (DLSE).
The law essentially allows employees, represented by private attorneys, to stand in for the state and all their co-workers in suing their employer.
One reason workers pursue PAGA claims is the tremendous backlog that the DLSE faces, and they do so in the belief that the claim will be handled more quickly. However, a report by the Fix PAGA Coalition found that workers filing claims directly with the DLSE wait fewer than 10 months on average for their awards, compared to 23 months for PAGA court case awards.
PAGA settlements have exploded in recent years, jumping 100% between 2016 and 2022, according to a study by the California Chamber of Commerce.
Proceeds from settlements are split 25% with the employee who filed the case and the rest with the state, which collected more than $200 million in civil penalties during the 2022-2023 fiscal year.
The Fix PAGA Coalition’s report found that non-profits, small businesses and other employers have paid out nearly $10 billion in PAGA case awards since 2013, with attorneys receiving the far bigger portion of the settlements and employees consistently receiving only minimal payments.
Backers of the PAGA ballot initiative agreed to withdraw their measure if the legislation is passed and signed into law, which it was on July 1.
Highlights of the agreement
The governor’s announcement highlighted that the measure would:
Redefine ‘standing’ — It would require workers to personally experience the alleged violations brought in a claim.
Cure provisions – It would expand the list of Labor Code violations that can be cured before a PAGA action commences, which could allow employers to avoid lawsuits by making employees whole after receiving notice of alleged violations.
Limiting claims – It would codify a court’s ability to limit the scope of claims presented at trial to better manage the complaint.
Reforms penalty structure — It would cap penalties on employers that quickly fix policies and/or practices to make workers whole after they receive a notice of a PAGA action. It also caps penalties on employers that proactively comply with the Labor Code before receiving a PAGA notice.
Workers larger share of awards – It would increase the portion of awards allocated to employees to 35% from 25%.
Newsom agreed to pursue a trailer bill to provide funding for the Labor Department to expedite hiring and filling vacancies.
The takeaway
Jennifer Barrera, CEO of the California Chamber of Commerce, said in a prepared statement: “This package provides meaningful reforms that ensure workers continue to have a strong vehicle to get labor claims resolved, while also limiting the frivolous litigation that has cost employers billions without benefiting workers.”
Legislators will have to move quickly to pass the measure into law by the June 27 deadline. While the legislation will not eliminate PAGA, all sides of the agreement predict it would go a long way towards reducing frivolous claims.