In an important development for California's construction industry, Assembly Bill 1034 (AB 1034) was signed into law last year, extending critical exemptions under the Labor Code Private Attorney General Act of 2004 (PAGA). Originally set to expire on January 1, 2028, the exemption for construction industry employees working under certain collective bargaining agreements will now remain in effect until January 1, 2038. The extension provides long-term relief from the substantial litigation risks that PAGA presents to employers in the construction industry.
Understanding PAGA and its Implications
PAGA, found in California Labor Code Section 2698 et seq., allows "aggrieved employees" to file civil lawsuits on behalf of themselves and other employees for violations of California's Labor Code. These lawsuits often lead to significant liability and are attractive to plaintiffs' attorneys due to the potential for hefty penalties and attorney fees. Under PAGA, even minor technical violations, such as payroll errors or incomplete wage statements, can result in costly penalties. The statute has been criticized for incentivizing litigation over negotiation and creating a compliance minefield for employers.
The Construction Industry Exemption
Recognizing the unique nature of the construction industry, PAGA exempts employees working under valid collective bargaining agreements (CBAs) meeting certain criteria. To qualify the CBA must:
- Be in effect ant time before January 1, 2025.
- Explicitly provide for wages, hours, and working conditions.
- Provide premium overtime pay.
- Ensure hourly pay at least 30% higher than the state minimum wage.
- Prohibit violations of the Labor Code otherwise redressable under PAGA.
- Establish grievance and binding arbitration procedures to address such violations.
These provisions aim to resolve disputes within the framework of the negotiated CBA rather than through PAGA litigation, which is often burdensome and disruptive for employers. By extending the exemption until 2038, AB 1034 shields qualifying construction employers from PAGA lawsuits for an additional decade. This is a critical development for employers in an industry already facing unique operational and regulatory challenges.
Defense Perspective: Key Takeaways
- Reduced Litigation Exposure: The PAGA exemption significantly limits employers' exposure to frivolous or opportunistic lawsuits. Plaintiffs' attorneys often target industries with high compliance burdens, such as construction, making this exemption a vital safeguard.
- Cost Savings: Avoiding PAGA lawsuits means employers can direct resources toward improving business operations and employee benefits instead of costly litigation.
- Streamlined Dispute Resolution: The exemption reinforces the use of arbitration and grievance procedures outlined in CBAs, offering a more predictable and efficient means of resolving disputes.
Looking Forward
While AB 1034 provides substantial relief, employers must remain vigilant. The construction industry continues industry continues to face regulatory scrutiny, and plaintiffs' attorneys may seek to challenge the exemption or find alternative avenues for litigation. By maintaining compliance and leveraging the benefits of this exemption, construction employers can focus on their business operations with greater confidence.
For assistance in navigating PAGA, collective bargaining agreements, or labor compliance matters, contact the team at Wood Smith Henning & Berman. Our experienced defense attorneys are dedicated to protecting your business interests and mitigating litigation risks.