On June 30, 2022, in California Business & Industrial Alliance v. Becerra, Case No. G059561 (CABIA), the California Court of Appeal (Fourth District) rejected a state constitutional challenge to the Private Attorneys General Act (PAGA). CABIA, a labor law advocacy group focused primarily on PAGA, filed an action seeking a judicial declaration that PAGA was unconstitutional under various theories and seeking an injunction against its enforcement. The trial court rejected the theories and sustained the demurrer without leave to amend.
On appeal, CABIA focused on a single theory in particular: that PAGA violates California's separation of powers doctrine by allowing private citizens to sue on the state's behalf without the executive branch exercising sufficient prosecutorial discretion. Slip op. at 2. The CABIA lawsuit is the latest in a series of lawsuits making similar challenges to the law, none of which have succeeded. In fact, the landmark case of Iskanian v. CLS Transportation Los Angeles LLC, 59 Cal. 4th 348 (2014) addressed this argument and likewise rejected it. (Iskanian was recently abrogated in part on other grounds by Viking River Cruises, Inc. v. Moriana, 142 S. Ct. 1906 (2022), which held that the Federal Arbitration Act preempts a key holding of Iskanian that prevented PAGA claims from being compelled to individual arbitration. To read about the Viking River Cruises decision, click here.)
Surveying case law on qui tam statutes like PAGA, Iskanian concluded that its enactment was a "legitimate exercise of legislative authority" and that "PAGA does not violate the principle of separation of powers under the California Constitution." Iskanian, 59 Cal. 4th at 360, 390. The Court of Appeal held that it was bound by this conclusion, but that also agreed with Iskanian's reasoning. The court rejected CABIA's argument that PAGA permits plaintiffs "to proceed without executive oversight," pointing out that the statute "requires notice to be given to the executive branch before commencement of a PAGA claim, immediately after the commencement of any such claim, upon submission of any proposed settlement of a PAGA claim for court approval, and upon issuance of judgment or other dispositive order in any PAGA civil action." CABIA, slip op. at 11-12.
With this latest ruling, PAGA still has an undefeated record against all facial challenges to the law in court, although it was weakened by the Viking River Cruises ruling, which held that the "individual" component of a PAGA claim may be compelled to individual arbitration, at which point the "non-individual" component must be dismissed for lack of standing. As a result, the next front in the battle over PAGA's future looks to be legislative. State Sen. Dave Cortese, the chair of the Senate Labor, Public Employment and Retirement Committee, announced last month that he is "prepared to author legislation to respond" to Viking River Cruises by creating "a new pathway to legal standing." Meanwhile, a PAC called Californians for Fair Pay and Accountability is seeking to qualify a ballot measure that would repeal PAGA. (To read about the Fair Pay and Employer Accountability Act, now targeted for the 2024 election, click here.)
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