California Construction Industry, Are They The Next Ripe Target For Private Attorney General Act Claims? Hint-The Answer Is Yes.

In January, California ushered in a new law designed to strengthen wage protections for employees who work under private construction contracts. The law makes all “direct contractors” potentially liable for wages incurred by an employee of any subcontractor-at any tier. The statute attempts to limit the remedies to those of unpaid wages, fringe or benefit contributions and interest and explicitly excludes penalties or liquidated damages. The statute itself also seems to limit those who can bring a claim for such damages to the Labor Commissioner or a union. While these limitations have been embedded in the statute they overlook the fact that under California’s Labor Code section 2699, the Private Attorney General Act-better known as PAGA-allows for a process that deputizes an employee who can  bring a claim on behalf of all “aggrieved employees” for virtually any Labor Code violation without ever having to seek class approval. Furthermore there is distinct uncertainty under the statute if the darling of the plaintiff’s bar-alleged meal and rest break violations-could be included in the claims brought under Labor Code 218.7.

You see the remedy for each meal or rest break violation is a one hour penalty wage. So would they be excluded given that the statute specifically excludes penalties? Maybe not. Some years ago an argument was made that these penalties should be subject to the one year statute of limitations typically applied to penalties. The California Supreme Court decided otherwise and ruled that these were penalty wages so they were subject to the longer statute of limitations applied to wages. These nuances and the opportunity to include more deep pockets and defendants on the PAGA claims that proliferate the courts in California will no doubt be exploited in the coming years. For ideas and suggestions to avoid being a target see here.

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