The Impact of California’s Private Attorney General Act (PAGA) on Employers and Workers

In 2004, California enacted the Private Attorney General Act (PAGA) to empower workers and address the overwhelming number of labor complaints that state enforcement agencies could not manage. This legislation aimed to provide individuals the means to pursue their claims against employers, effectively outsourcing labor law enforcement to private citizens.

A Billion-Dollar Industry Benefiting Attorneys

Despite its initial intentions, PAGA has developed into a multibillion-dollar industry primarily benefiting a select group of attorneys. According to a new tracker released by the California Business & Industrial Alliance (CABIA), the law has led to extensive payouts primarily favoring legal practitioners over workers. Founder Tom Manzo emphasizes this contradiction, pointing out that while the act was designed to assist employees, the financial benefits have largely shifted to the lawyers involved in these cases.

Proposed Reforms to PAGA

In light of growing concerns regarding the efficacy of PAGA, California lawmakers are revisiting the framework two years after the implementation of reforms. Among the proposals under consideration is a requirement for individuals labeled as “vexatious” or “frivolous” filers to identify themselves when filing complaints. This move aims to filter out cases that may overwhelm the system without merit.

On April 9, 2026, the Labor & Workforce Development Agency (LWDA) hosted discussions regarding these potential reforms, highlighting the necessity for clearer regulations.

The Growing Burden on Businesses

Tom Manzo asserts that PAGA has increasingly strained employers in California, driving them out of business. He illustrates how the act has evolved into a significant financial burden, leading to nearly $2.2 billion in payouts from approximately 2,400 lawsuits in the wake of the recent reforms. Alarmingly, $735 million of this total was allocated to attorneys’ fees.

While acknowledging the importance of employee protections, attorney Eric Kingsley suggests that PAGA offers a necessary mechanism for workers seeking justice in the face of labor violations. He warns that repealing the act could deprive employees of collective action and fail to incentivize compliance among employers.

Legal Landscape: Current Challenges and Trends

The annual statistics indicate a consistent increase in PAGA payouts. In 2025, payouts reached approximately $2.2 billion, surpassing previous totals and adversely affecting businesses. Most cases involve claims around unpaid wages and missed breaks, emphasizing the critical need for effective labor law enforcement.

Interestingly, while 9,000 PAGA notices were sent out in the past year, only about 2,420 resulted in lawsuits. This discrepancy speaks to the influence of lawyers who may compel businesses to settle before matters escalate to court.

PAGA Notices: A Template-Driven Process

According to recent reports by the LWDA, five law firms generated a quarter of the total 8,800 PAGA notices filed in fiscal year 2024-2025, with some firms submitting notices at an alarming rate. The heavy reliance on boilerplate notices hampers the true assessment of each case and burdens the court system.

As part of the proposed regulations, law firms submitting over 200 PAGA notices will need to substantiate their claims beyond basic templates. This effort is crucial in addressing loopholes that exploit the system and contribute to the escalating costs for businesses.

Moving Forward: Advocating for Reform

Manzo advocates for California to reclaim its labor enforcement capabilities, given the significant revenue generated through PAGA penalties. He argues that these funds could effectively support the hiring of necessary personnel to address labor issues directly instead of relying on private entities.

While the focus on reforms is crucial, both Kingsley and Manzo stress that true legislative change requires broader awareness and action. They emphasize that without a comprehensive overhaul of arbitration laws at the federal level, issues stemming from PAGA may persist.

The Path Ahead: A Call for Legislative Action

As businesses navigate the complexities of labor law, a renewed emphasis on fair enforcement and removing barriers within the PAGA framework becomes increasingly urgent. The ongoing dialogue involving various stakeholders—including attorneys, lawmakers, and business owners—remains vital to achieving an equitable labor environment that meets the needs of both employees and employers.

For those seeking more information on the Private Attorney General Act, additional insights can be found at the California Department of Industrial Relations and the CABIA research tracker.